Monday, March 31, 2008
Paying the price for the green elite
Fund Strategy has run my review of James Heartfield’s Green Capitalism in today’s issue.
Terms such as "ethical", "responsible" and "environmentally friendly" are used so often nowadays in the investment world that it almost seems churlish to question them. Who would want to present themselves as unethical, irresponsible or hostile to the environment?
Yet James Heartfield, a writer and lecturer based in London, puts a strong case for such terms to be interrogated. In "Green Capitalism" he argues that the rise of environmentalism and green consumerism are entirely negative trends. His logic is compelling even though it runs directly counter to the spirit of the times.
Heartfield's starting point is that the global elite is facing its worst nightmare: cornucopia. Until recently the history of humanity was one of living in conditions of scarcity. But the virtual abolition of scarcity, at least in the developed West, has radically changed perceptions. The elite feels a desperate need to recreate scarcity artificially just as developed economies have overcome its constraints.
The origins of contemporary environmentalism go back to the economic crisis of the mid-1970s. At that time the Club of Rome, an organisation of top industrialists, sponsored a high-profile report on "The Limits to Growth". It argued that the world economy was increasingly coming up against natural limits - although its predictions have proved ridiculously pessimistic over time. The backdrop to the report was the combination of economic crisis and industrial militancy of the time. Under such circumstances this early form of environmentalism helped make cuts in wages and a reduction in popular living standards more acceptable.
More recently, two developments have helped popularise green thinking. The first is what Heartfield calls "the retreat from production". With the abolition of scarcity it became easier to prioritise other forms of economic activity besides industry. Financial markets took on an enormous importance; most strikingly in Britain.
Notions such as brands and the New Economy were elevated to the status of key concepts. Industry, in contrast, was increasingly viewed with disdain. It was often more associated with emerging economies, notably China and India, than the developed West.
The second development was the end of the Cold War and the demise of the Soviet Union in the late 1980s. This deprived the ruling elite of a focus as anti-communism had long played an important unifying role for the Western powers. It also led many disorientated radicals to support environmentalism.
This combination of factors has had perverse results. In particular it has meant that a misplaced belief in natural limits has come to the fore. For Heartfield there is no real shortage of natural resources in the world. Instead there is an ever increasing manufacturing of scarcity by the ruling elite.
An excellent contemporary example of this trend is the retirement of land from production. "Green Capitalism" points out that almost 19m square kilometres of land, more than the combined area of China and South-East Asia, are classified as protected. This amount has grown more than sevenfold since 1962.
Heartfield argues that this is the main cause of rising food prices. It is a problem of an artificial constraint on supply rather than growing consumer demand. The increasing area of land devoted to growing crops for biofuel is tiny in relative terms. If even a small proportion of "protected" land were harnessed for agricultural production, it is likely food prices would fall dramatically.
The trend towards organic food also helps to exacerbate rising prices. Since yields from organic farming are low - by definition it shuns modern farming methods - land cannot be used efficiently. Although the total consumption of organic food is relatively small, its popularity illustrates the disdain of the green elite for economic efficiency.
A particular irony is that the richest people in the world, in other words those who consume the most resources, tend to be the greenest. In Britain this includes the likes of Zac Goldsmith of the Ecologist magazine (an Old Etonian and an heir to the Goldsmith family fortune) and Lord Peter Melchett (another Etonian, and director of the Soil Association). In America the mould is set by Al Gore (the son of a senator and the owner of three homes, including a 20-room mansion).
It is tempting but misleading to accuse such people of hypocrisy. It would be closer to the mark to describe them as elitists. Their objection is not to consumption itself but to mass consumption. They see no problem with their own considerable appetite for resources but they believe that popular consumption is constrained by natural limits.
Indeed, this elitist view of consumption, Heartfield argues, is embodied more generally in green consumerism. The main role of green products - whether organic tomatoes or GM-free soya - is what he calls "status affirmation". It is to mark the green consumer out from the bulk of society. In that way the green consumer can happily use resources while distancing himself from the consumption of the mainstream. Such expressions of ethics are in reality declarations of moral superiority. Their importance is symbolic rather than practical.
Another common expression of disdain for ordinary people, in Heartfield's view, is the attitude greens typically take to the most valuable resource of all: human time. Their admonitions to recycle, not use standby buttons and save energy are free of any concerns for the time such actions take for the average household. Ordinary people are expected to expend enormous amounts of their energy on useless gestures.
It is a shame that "Green Capitalism" is not more widely available. Although its arguments are often counter-intuitive they represent a powerful critique of the pervasive outlook of environmentalism. An unexpected bonus is that it also provides insights into practical issues such as the surge in food prices.
Fortunately, through the power of the internet, it should be possible for those readers who are interested to get hold of a copy.
Terms such as "ethical", "responsible" and "environmentally friendly" are used so often nowadays in the investment world that it almost seems churlish to question them. Who would want to present themselves as unethical, irresponsible or hostile to the environment?
Yet James Heartfield, a writer and lecturer based in London, puts a strong case for such terms to be interrogated. In "Green Capitalism" he argues that the rise of environmentalism and green consumerism are entirely negative trends. His logic is compelling even though it runs directly counter to the spirit of the times.
Heartfield's starting point is that the global elite is facing its worst nightmare: cornucopia. Until recently the history of humanity was one of living in conditions of scarcity. But the virtual abolition of scarcity, at least in the developed West, has radically changed perceptions. The elite feels a desperate need to recreate scarcity artificially just as developed economies have overcome its constraints.
The origins of contemporary environmentalism go back to the economic crisis of the mid-1970s. At that time the Club of Rome, an organisation of top industrialists, sponsored a high-profile report on "The Limits to Growth". It argued that the world economy was increasingly coming up against natural limits - although its predictions have proved ridiculously pessimistic over time. The backdrop to the report was the combination of economic crisis and industrial militancy of the time. Under such circumstances this early form of environmentalism helped make cuts in wages and a reduction in popular living standards more acceptable.
More recently, two developments have helped popularise green thinking. The first is what Heartfield calls "the retreat from production". With the abolition of scarcity it became easier to prioritise other forms of economic activity besides industry. Financial markets took on an enormous importance; most strikingly in Britain.
Notions such as brands and the New Economy were elevated to the status of key concepts. Industry, in contrast, was increasingly viewed with disdain. It was often more associated with emerging economies, notably China and India, than the developed West.
The second development was the end of the Cold War and the demise of the Soviet Union in the late 1980s. This deprived the ruling elite of a focus as anti-communism had long played an important unifying role for the Western powers. It also led many disorientated radicals to support environmentalism.
This combination of factors has had perverse results. In particular it has meant that a misplaced belief in natural limits has come to the fore. For Heartfield there is no real shortage of natural resources in the world. Instead there is an ever increasing manufacturing of scarcity by the ruling elite.
An excellent contemporary example of this trend is the retirement of land from production. "Green Capitalism" points out that almost 19m square kilometres of land, more than the combined area of China and South-East Asia, are classified as protected. This amount has grown more than sevenfold since 1962.
Heartfield argues that this is the main cause of rising food prices. It is a problem of an artificial constraint on supply rather than growing consumer demand. The increasing area of land devoted to growing crops for biofuel is tiny in relative terms. If even a small proportion of "protected" land were harnessed for agricultural production, it is likely food prices would fall dramatically.
The trend towards organic food also helps to exacerbate rising prices. Since yields from organic farming are low - by definition it shuns modern farming methods - land cannot be used efficiently. Although the total consumption of organic food is relatively small, its popularity illustrates the disdain of the green elite for economic efficiency.
A particular irony is that the richest people in the world, in other words those who consume the most resources, tend to be the greenest. In Britain this includes the likes of Zac Goldsmith of the Ecologist magazine (an Old Etonian and an heir to the Goldsmith family fortune) and Lord Peter Melchett (another Etonian, and director of the Soil Association). In America the mould is set by Al Gore (the son of a senator and the owner of three homes, including a 20-room mansion).
It is tempting but misleading to accuse such people of hypocrisy. It would be closer to the mark to describe them as elitists. Their objection is not to consumption itself but to mass consumption. They see no problem with their own considerable appetite for resources but they believe that popular consumption is constrained by natural limits.
Indeed, this elitist view of consumption, Heartfield argues, is embodied more generally in green consumerism. The main role of green products - whether organic tomatoes or GM-free soya - is what he calls "status affirmation". It is to mark the green consumer out from the bulk of society. In that way the green consumer can happily use resources while distancing himself from the consumption of the mainstream. Such expressions of ethics are in reality declarations of moral superiority. Their importance is symbolic rather than practical.
Another common expression of disdain for ordinary people, in Heartfield's view, is the attitude greens typically take to the most valuable resource of all: human time. Their admonitions to recycle, not use standby buttons and save energy are free of any concerns for the time such actions take for the average household. Ordinary people are expected to expend enormous amounts of their energy on useless gestures.
It is a shame that "Green Capitalism" is not more widely available. Although its arguments are often counter-intuitive they represent a powerful critique of the pervasive outlook of environmentalism. An unexpected bonus is that it also provides insights into practical issues such as the surge in food prices.
Fortunately, through the power of the internet, it should be possible for those readers who are interested to get hold of a copy.
Labels: book, consumption, economics, environment, review
Thursday, March 27, 2008
Growth scepticism hits the roads
Kevin Watkins, now at Oxford University’s global economic governance programme but formerly at the United Nations Development Programme and Oxfam, had a comment in yesterday’s Guardian on the scourge of traffic accidents in developing countries. Sadly he used the opportunity to take a side swipe at economic growth while also implicitly calling for more external intervention into poor countries:
“Why, then, are governments failing to protect their citizens? Partly because the victims lack a political voice. But often traffic death and injury is viewed as the inevitable collateral damage that comes with economic growth.”
Surely the key problem is that such countries do not have the resources to provide adequate safety measures. In that sense it is a problem that comes with insufficient economic growth. No doubt the more affluent such countries become they better able they will be to provide a better infrastructure for their inhabitants.
“Why, then, are governments failing to protect their citizens? Partly because the victims lack a political voice. But often traffic death and injury is viewed as the inevitable collateral damage that comes with economic growth.”
Surely the key problem is that such countries do not have the resources to provide adequate safety measures. In that sense it is a problem that comes with insufficient economic growth. No doubt the more affluent such countries become they better able they will be to provide a better infrastructure for their inhabitants.
Labels: development, growth, transport
Wednesday, March 26, 2008
The defensiveness of free marketeers
A substantial feature in Monday’s Wall Street Journal on the new “limits to growth” illustrated, if anything, the limitations of the free market critique of environmentalism. The article - which unfortunately it not freely available on line - started with the correct observation that the Cassandras have always proved wrong on limited resources. But it lacked confidence in the ability of the current generation to increase supply to meet rising demand. Its conclusion:
“Indeed, the true lesson of Thomas Malthus, an English economist who died in 1834, isn't that the world is doomed, but that preservation of human life requires analysis and then tough action. Given the history of England, with its plagues and famines, Malthus had good cause to wonder if society was "condemned to a perpetual oscillation between happiness and misery." That he was able to analyze that "perpetual oscillation" set him and his time apart from England's past. And that capacity to understand and respond meant that the world was less Malthusian thereafter.”
By coincidence the Financial Times today ran a piece by Martin Wolf, its chief economics commentator, lamenting the death of the free market:
“Remember Friday March 14 2008: it was the day the dream of global free- market capitalism died. For three decades we have moved towards market-driven financial systems. By its decision to rescue Bear Stearns, the Federal Reserve, the institution responsible for monetary policy in the US, chief protagonist of free-market capitalism, declared this era over. It showed in deeds its agreement with the remark by Josef Ackermann, chief executive of Deutsche Bank, that “I no longer believe in the market’s self-healing power”. Deregulation has reached its limits.”
“Indeed, the true lesson of Thomas Malthus, an English economist who died in 1834, isn't that the world is doomed, but that preservation of human life requires analysis and then tough action. Given the history of England, with its plagues and famines, Malthus had good cause to wonder if society was "condemned to a perpetual oscillation between happiness and misery." That he was able to analyze that "perpetual oscillation" set him and his time apart from England's past. And that capacity to understand and respond meant that the world was less Malthusian thereafter.”
By coincidence the Financial Times today ran a piece by Martin Wolf, its chief economics commentator, lamenting the death of the free market:
“Remember Friday March 14 2008: it was the day the dream of global free- market capitalism died. For three decades we have moved towards market-driven financial systems. By its decision to rescue Bear Stearns, the Federal Reserve, the institution responsible for monetary policy in the US, chief protagonist of free-market capitalism, declared this era over. It showed in deeds its agreement with the remark by Josef Ackermann, chief executive of Deutsche Bank, that “I no longer believe in the market’s self-healing power”. Deregulation has reached its limits.”
Labels: consumption, economics, finance, growth
Monday, March 24, 2008
A costly middle class?
Moisés Naím has an ambivalent article in Foreign Policy (March / April 2008) entitled “Can the World Afford A Middle Class?”. His short answer is “yes, but it will be awfully expensive”. Naim makes the correct but obvious point that the economic development of the likes of China and India will involve the use of a huge amount of resources. However, Naím seems doubtful about the ability of humanity to find new sources of supply for natural resources. Although he does not openly embrace Malthus he expects the surge in demand for resources to have unexpected and painful side effects.
Labels: china, consumption, development, economics, inequality
Friday, March 21, 2008
China as “green peril” catch-up
Last week’s (15 March) Economist seemed to confirm some of the points I made in my recent spiked article about China being viewed as a “green peril”. The front cover branded China as the “new colonialists” for its hunger for natural resources. The headline of one of the articles on its survey of China’s use of natural resources was “the perils of abundance” and declared that “China must learn to do more with less”. Fortunately the main body copy was not quite as unbalanced but it shows the limits of the Economist’s supposed free market critique of environmentalism.
Labels: china, environment
Plastic bag catch-up
Now that it is the Easter holidays I can catch up on some of the supposedly great issues of our time. The first is plastic bags. In Britain the campaign against these useful items has had the support of Gordon Brown, the prime minister, and the Daily Mail newspaper. However, Dick Taverne of Sense About Science has exposed how the campaign against them is based on faulty science. In addition, Angus Kennedy has written on spiked about how the hysterical campaign against plastic bags is causing job losses in the East.
Labels: consumption, environment, science
Wednesday, March 19, 2008
A contemporary Malthus
Jeffrey Sachs has a new book out. Yet, judging by an extract in Time magazine (24 March), Common Wealth for a Crowded Planet repeats many of the themes of his previous work (see links to “my reviews” in the left hand column):
“The defining challenge of the 21st century will be to face the reality that humanity shares a common fate on a crowded planet. We have reached the beginning of the century with 6.6 billion people living in an interconnected global economy producing an astounding $60 trillion of output each year. Human beings fill every ecological niche on the planet, from the icy tundra to the tropical rain forests to the deserts. In some locations, societies have outstripped the carrying capacity of the land, resulting in chronic hunger, environmental degradation and a large-scale exodus of desperate populations. We are, in short, in one another's faces as never before, crowded into an interconnected society of global trade, migration, ideas and, yes, risk of pandemic diseases, terrorism, refugee movements and conflict.
“We also face a momentous choice. Continue on our current course, and the world is likely to experience growing conflicts between haves and have-nots, intensifying environmental catastrophes and downturns in living standards caused by interlocking crises of energy, water, food and violent conflict. Yet for a small annual investment of world income, undertaken cooperatively across the world, our generation can harness new technologies for clean energy, reliable food supplies, disease control and the end of extreme poverty.”
Although he does not say it explicitly his argument is that there are natural limits to economic growth. The best we can hope for is to eradicate “extreme poverty”. Our growing use of resources, in his view, could lead to disease, terrorism and conflict.
“The defining challenge of the 21st century will be to face the reality that humanity shares a common fate on a crowded planet. We have reached the beginning of the century with 6.6 billion people living in an interconnected global economy producing an astounding $60 trillion of output each year. Human beings fill every ecological niche on the planet, from the icy tundra to the tropical rain forests to the deserts. In some locations, societies have outstripped the carrying capacity of the land, resulting in chronic hunger, environmental degradation and a large-scale exodus of desperate populations. We are, in short, in one another's faces as never before, crowded into an interconnected society of global trade, migration, ideas and, yes, risk of pandemic diseases, terrorism, refugee movements and conflict.
“We also face a momentous choice. Continue on our current course, and the world is likely to experience growing conflicts between haves and have-nots, intensifying environmental catastrophes and downturns in living standards caused by interlocking crises of energy, water, food and violent conflict. Yet for a small annual investment of world income, undertaken cooperatively across the world, our generation can harness new technologies for clean energy, reliable food supplies, disease control and the end of extreme poverty.”
Although he does not say it explicitly his argument is that there are natural limits to economic growth. The best we can hope for is to eradicate “extreme poverty”. Our growing use of resources, in his view, could lead to disease, terrorism and conflict.
Labels: book, development, economics, environment, inequality
Monday, March 17, 2008
Happy but not happy enough
The New York Review of Books (3 April) has an article by Sue Halpern, a scholar in residence at Middlebury College, reviewing books on happiness by Tal Ben-Shahar, Daniel Gilbert, Jerome Kagan, Sonja Lyubomirsky and Eric Wilson. There is too much to summarise in a short note but points worth noting include the fact that most people around the world are happy:
“When happiness researcher Ed Diener, the past president of the International Society of Quality of Life Studies, synthesized 916 surveys of over a million people in forty-five countries, he found that, on average, people placed themselves at seven on the zero-to-ten scale.”
However, despite the fact that we are generally happy we are apparently obsessed with becoming happier still:
“Still, since nearly all of us say we're happy (especially if we live in Puerto Rico, Mexico, Denmark, Ireland, Iceland, and Switzerland, which are among the happiest of happy places), it is somewhat disconcerting to observe the burgeoning library of "get happy" books.”
“When happiness researcher Ed Diener, the past president of the International Society of Quality of Life Studies, synthesized 916 surveys of over a million people in forty-five countries, he found that, on average, people placed themselves at seven on the zero-to-ten scale.”
However, despite the fact that we are generally happy we are apparently obsessed with becoming happier still:
“Still, since nearly all of us say we're happy (especially if we live in Puerto Rico, Mexico, Denmark, Ireland, Iceland, and Switzerland, which are among the happiest of happy places), it is somewhat disconcerting to observe the burgeoning library of "get happy" books.”
Labels: happiness
Sunday, March 16, 2008
A “pro-poor” attack on growth
Thomas Pogge argues in the Winter 2008 issue of Dissent that sacrificing economic growth is a “moral imperative”. His argument, which has many elements to it, is based on professed concern for the poor and for the environment.
To begin to tackle his arguments lets take four of his points on China and work out how to counter them:
* Claim one: Severe poverty has declined in China but the exact magnitude is uncertain. Counter: The magnitude may be uncertain but it does not follow that the gain is not worth having.
* Claim two: The sharp rise in international inequality may not be necessary for China’s growth and poverty reduction. Counter: China’s growth and poverty reduction are good things in themselves. The “necessity” of inequality is another question.
* Claim three: “Intranational inequality is not a simple economic parameter that clever economic planners can, in light of prevailing conditions, move up or down like the overnight interest rate”. Counter: That is true. Inequality does seem to be deeply rooted in capitalist economics. But at other points in the argument Pogge himself seems to assume that redistribution can be easily achieved.
Claim four: China’s spectacular growth is at the expense of other countries. Counter: No. Economic growth is not a zero-sum game. Pogge grudgingly admits this point but then seems to backtrack on it.
To begin to tackle his arguments lets take four of his points on China and work out how to counter them:
* Claim one: Severe poverty has declined in China but the exact magnitude is uncertain. Counter: The magnitude may be uncertain but it does not follow that the gain is not worth having.
* Claim two: The sharp rise in international inequality may not be necessary for China’s growth and poverty reduction. Counter: China’s growth and poverty reduction are good things in themselves. The “necessity” of inequality is another question.
* Claim three: “Intranational inequality is not a simple economic parameter that clever economic planners can, in light of prevailing conditions, move up or down like the overnight interest rate”. Counter: That is true. Inequality does seem to be deeply rooted in capitalist economics. But at other points in the argument Pogge himself seems to assume that redistribution can be easily achieved.
Claim four: China’s spectacular growth is at the expense of other countries. Counter: No. Economic growth is not a zero-sum game. Pogge grudgingly admits this point but then seems to backtrack on it.
Labels: development, environment, inequality
Wednesday, March 12, 2008
Opposing Labour’s elitist defence of affluence
Yesterday I appeared on Colourful Radio, which describes itself as ‘talk radio with soul”, discussing the Progress lecture by John Hutton, Labour’s business secretary, where he apparently praised affluence. I cannot currently find a copy of his speech on the internet but according to a BBC article the Blairite minister said “more millionaires” are needed and the freedom to get rich is “a good thing”. It drew predictable complaints from vaguely leftist commentators such as Polly Toynbee and Neal Lawson. For example, Lawson argues that a “modern left” wants to offer the working class “social citizenship, real quality of life, sustainability and the right balance between what we need and wants as individuals and members of society”.
My argument, in contrast, is that affluence should not just be for the elite. Everyone should have access to the best that society has to offer. Coming from a website with the slogan “Ferraris for All” that should not be a surprise. I pointed out that, as today’s Budget would show, Labour is the party of green austerity.
My argument, in contrast, is that affluence should not just be for the elite. Everyone should have access to the best that society has to offer. Coming from a website with the slogan “Ferraris for All” that should not be a surprise. I pointed out that, as today’s Budget would show, Labour is the party of green austerity.
Labels: economics, media appearances
Water not finite
AA Gill, the restaurant critic of the Sunday Times (London), has written an excellent review making what should be an obvious point - but sadly is not - that water is the ultimate recylable commodity (9 March):
“All the water that ever was, every ice-age glacier, every princess’s tear, every rill, gill, brook, beck and burn, each and every drop of monsoon, all scattered showers, every old man’s prostate dribble and teenager’s salivay snog is still here. The world is as soggy as the Garden of Eden.
“Water is not a finite resource; it isn’t a vanishing commodity; if you leave the tap running, it doesn’t vanish for ever. Don’t let anybody tell you that you’re wasting it: you can’t. You may be wasting the energy that brought it to you, but you’re not clever enough or powerful enough to vanish. Water is constantly on the move. It flies in the night in the howling storm, burrows through the minutest crease in the impregnable rock, rests behind the skirting board, meditates brightly on dawn spiders’ webs. The cupidity and caprice of water is one of the central themes of mankind’s saga. We have to go with the flow.”
“All the water that ever was, every ice-age glacier, every princess’s tear, every rill, gill, brook, beck and burn, each and every drop of monsoon, all scattered showers, every old man’s prostate dribble and teenager’s salivay snog is still here. The world is as soggy as the Garden of Eden.
“Water is not a finite resource; it isn’t a vanishing commodity; if you leave the tap running, it doesn’t vanish for ever. Don’t let anybody tell you that you’re wasting it: you can’t. You may be wasting the energy that brought it to you, but you’re not clever enough or powerful enough to vanish. Water is constantly on the move. It flies in the night in the howling storm, burrows through the minutest crease in the impregnable rock, rests behind the skirting board, meditates brightly on dawn spiders’ webs. The cupidity and caprice of water is one of the central themes of mankind’s saga. We have to go with the flow.”
Labels: consumption, environment
Monday, March 10, 2008
China is no “green peril”
Spiked has published my essay on why China’s environmental problems do not make it a “green peril”. It is based my talk to the China Development Society of the London School of Economics Students Union and part of a spiked campaign against China-bashing.
Labels: china, environment, speeches, spiked
Sunday, March 09, 2008
Celebrities and development
The cover story of today’s New York Times magazine looks at celebrities and the causes they support. It focuses particularly on Natalie Portman as she is evidently an “ambassador” for the Foundation for International Community Assistance (Finca) a microfinance organisation. Others mentioned in the piece include Bono, George Clooney, Angelina Jolie and Brad Pitt.
No doubt even many of the critics would argue that at least celebrities do some good by raising “awareness” of important issues. In fact, as Mick Hume has previously argued on spiked, such initiatives are typically based on the assumption that the West has to “save” the people of the third world from themselves. In the case of Natalie Portman she is – inadvertently no doubt – reinforcing low horizons in relation to development when she promotes microfinance.
No doubt even many of the critics would argue that at least celebrities do some good by raising “awareness” of important issues. In fact, as Mick Hume has previously argued on spiked, such initiatives are typically based on the assumption that the West has to “save” the people of the third world from themselves. In the case of Natalie Portman she is – inadvertently no doubt – reinforcing low horizons in relation to development when she promotes microfinance.
Labels: development, ethics, film, finance, spiked
Capitalism and anti-capitalism
Dolan Cummings of the Institute of Ideas has an astute review essay on the Culture Wars website on contemporary capitalism and anti-capitalism. He argues that:
“That the defence of capitalism takes the form of an apology is nothing new, but the critique made today is very different from that of traditional anti-capitalism. While in the last century the pragmatic case for capitalism was made in opposition to calls for social change, in this case it is the opposite: it is capitalism that threatens to transform society and critics who seek to conserve the status quo, talking in terms of resisting change rather than taking control of it. Rather than debating which changes are or are not desirable, from more convenient shop opening hours to GM food, we are presented with a binary opposition: for or against this single relentless force, variously described as ‘neoliberalism’, ‘globalisation’ or simply ‘capitalism’? Worse, critics rarely expect to prevail anyway: ‘anti-capitalism’ has become a moralistic posture rather than a political challenge. Significantly, this almost-emotional critique has become mainstream only with the passing of the political alternative that once had capitalism on the defensive.”
Cummings touches on similar themes to me in my critique of growth scepticism. Among the authors he cites are Benjamin Barber, Daniel Bell, Frank Furedi, Clive Hamilton, Eva Illouz, Oliver James and Brink Lindsey.
“That the defence of capitalism takes the form of an apology is nothing new, but the critique made today is very different from that of traditional anti-capitalism. While in the last century the pragmatic case for capitalism was made in opposition to calls for social change, in this case it is the opposite: it is capitalism that threatens to transform society and critics who seek to conserve the status quo, talking in terms of resisting change rather than taking control of it. Rather than debating which changes are or are not desirable, from more convenient shop opening hours to GM food, we are presented with a binary opposition: for or against this single relentless force, variously described as ‘neoliberalism’, ‘globalisation’ or simply ‘capitalism’? Worse, critics rarely expect to prevail anyway: ‘anti-capitalism’ has become a moralistic posture rather than a political challenge. Significantly, this almost-emotional critique has become mainstream only with the passing of the political alternative that once had capitalism on the defensive.”
Cummings touches on similar themes to me in my critique of growth scepticism. Among the authors he cites are Benjamin Barber, Daniel Bell, Frank Furedi, Clive Hamilton, Eva Illouz, Oliver James and Brink Lindsey.
Labels: book, economics, review
Wednesday, March 05, 2008
The spirit of Malthus best left in grave
There follows a comment by me from this week’s Fund Strategy. It is related to the news analysis on rising food prices that I posted yesterday.
Thomas Malthus, who more than anyone else popularised the idea that population grows faster than food supply, died in 1834. It is a tragedy that so many people now seem intent on resurrecting his ideas.
When Malthus first published "An Essay on the Principle of Population" in 1798 he famously argued that the food supply would rise arithmetically (1, 2, 3, 4 and so on) while population would grow geometrically (1, 2, 4, 8 etc). He therefore foresaw a future of mass starvation and famine.
Fortunately, nearly 200 years of history have proved Malthus wrong. It is true that over the years there have been occasional famines, with many millions dying. But the general trend is of vast improvement. Overall, the average human has far more and better-quality food than when Malthus was writing, despite the huge rise in population. There is still some way to go before everyone is well fed but the situation is generally getting better. It should be remembered that back in Malthus's time virtually everyone lived on the edge of starvation.
The fundamental mistake Malthus made was to underestimate human ingenuity. Although demand for food has increased, the supply has risen even more. People have harnessed new technology to allow agricultural yields to rise enormously. Far more food is produced for each hectare of land.
Sadly, many contemporary authorities propound what are essentially Malthusian views. The recent surge in global food prices has added impetus to such arguments. Many conclude that rising population and affluence, which they see as driving up prices, are therefore negative developments.
Like Malthus the contemporary cynics underestimate humanity. They do not see that the richer we are the more technology is likely to develop and the better able we will be to deal with problems. For example, richer countries are in a stronger position to deal with the challenge of climate change. The Netherlands can afford modern flood defences whereas Bangladesh currently cannot.
Ironically it is often the same doomsters who block technological progress. The widespread campaign in Europe against genetically modified crops is a good example. Such technology could provide huge advances in raising yields, yet many are acting against its implementation.
It would be far better to let Malthus rest in his grave than try to bring his spirit back to life.
Thomas Malthus, who more than anyone else popularised the idea that population grows faster than food supply, died in 1834. It is a tragedy that so many people now seem intent on resurrecting his ideas.
When Malthus first published "An Essay on the Principle of Population" in 1798 he famously argued that the food supply would rise arithmetically (1, 2, 3, 4 and so on) while population would grow geometrically (1, 2, 4, 8 etc). He therefore foresaw a future of mass starvation and famine.
Fortunately, nearly 200 years of history have proved Malthus wrong. It is true that over the years there have been occasional famines, with many millions dying. But the general trend is of vast improvement. Overall, the average human has far more and better-quality food than when Malthus was writing, despite the huge rise in population. There is still some way to go before everyone is well fed but the situation is generally getting better. It should be remembered that back in Malthus's time virtually everyone lived on the edge of starvation.
The fundamental mistake Malthus made was to underestimate human ingenuity. Although demand for food has increased, the supply has risen even more. People have harnessed new technology to allow agricultural yields to rise enormously. Far more food is produced for each hectare of land.
Sadly, many contemporary authorities propound what are essentially Malthusian views. The recent surge in global food prices has added impetus to such arguments. Many conclude that rising population and affluence, which they see as driving up prices, are therefore negative developments.
Like Malthus the contemporary cynics underestimate humanity. They do not see that the richer we are the more technology is likely to develop and the better able we will be to deal with problems. For example, richer countries are in a stronger position to deal with the challenge of climate change. The Netherlands can afford modern flood defences whereas Bangladesh currently cannot.
Ironically it is often the same doomsters who block technological progress. The widespread campaign in Europe against genetically modified crops is a good example. Such technology could provide huge advances in raising yields, yet many are acting against its implementation.
It would be far better to let Malthus rest in his grave than try to bring his spirit back to life.
Labels: consumption, economics, food, Fund Strategy
Tuesday, March 04, 2008
News analysis on rising food prices
There follows part of a news analysis by me on rising food prices from this week’s Fund Strategy.
While Borat enjoyed mocking America, last week's news from that comedy character's "home" country, Kazakhstan, was far from a joke. The price of wheat being exported from Kazakhstan, one of the world's largest exporters of the grain, rose 25% in one day. Its government had introduced export tariffs to quell domestic inflationary pressures.
The surge in Kazakh wheat prices added to a more general surge in global food prices, which rose by 38% between September 2006 and January 2008, judging by the International Monetary Fund (IMF) Food Price Index (see graph). Food prices have more than doubled since their low in July 1999.
Such substantial price increases bring winners and losers worldwide. Possibly the biggest losers are the urban poor. The poor in cities have little disposable income and have to buy their own food. But three-quarters of the world's poorest people, defined by the World Bank as those living on less than a dollar (50p) a day, live in rural areas. At least some of them could benefit from rising food prices. Farmers, even those working on a small scale, could be paid more for their produce. However, most poor households are net buyers of food.
For fund investors the surge in food prices has brought a particularly welcome bonanza (see box). With more conventional asset classes - such as bonds and equities - performing poorly, it has become more attractive to invest in assets related to agriculture. As a bonus, there are diversification benefits to be had from investing in the agricultural sector. No doubt many investors would contend that such investments play a positive social role by bringing much needed capital to the agricultural sector.
A more general impact will be the effect of rising food prices on inflationary pressures. It is likely to be greater in poorer countries, since they spend a higher proportion of their income on food. But the more food prices increase, the more inflation is likely to become a problem worldwide.
To examine the likely trajectory of food prices it is necessary to examine both supply and demand factors. It is also useful to distinguish between those that are relatively short term and longer-term effects.
On the demand side, there are several key long-term factors. First, there is population growth. More people means more mouths to feed.
Second, the developing countries are becoming richer and more urbanised. As people become wealthier they tend to eat more meat, which itself means more grain has to be used as animal feed. It takes several kilos of grain to produce one kilo of meat.
For example, China's annual average meat consumption has risen from 34kg per person in 1997 to 50kg today, according to an authoritative study from the United Nations Food and Agriculture Organization and the Organisation for Economic Cooperation and Development*. India's consumption is much lower, although also rising; increasing from 3.4kg in 1997 to 4.4kg in 2008. The average for the developed world is about 66kg. Overall, the World Bank estimates that global demand for food is likely to double within 50 years.
Finally, there is the rise of the biofuel industry. This is diverting food away from human consumption into energy production. America in particular has provided substantial subsidies to its farmers to produce biofuels.
However, demand side factors alone cannot explain rising prices. The first two factors in particular are long-term trends. Yet the surge in food prices is a relatively recent development.
Part of the explanation for recent price rises is in one-off or short-term factors such as extreme weather in Australia, Europe and north America. Many fear such problems will be made worse by climate change.
However, George Lee, the manager of the CF Eclectica Agriculture fund, also emphasises the time lag - or what economists call inelasticity - between rising demand and increasing supply. "The problem is it takes quite a while for new investment to come through," he says.
When prices were low there was little incentive for suppliers to invest. Although more investment is likely, it can take several years to set up a fully functioning farm from scratch. Investments in technology, such as genetic modification, could also play a big role in raising agricultural productivity.
Other factors not directly related to food can also have a significant effect. For example, rising energy prices can bolster food prices since agriculture can be energy intensive. Also the weakness of the dollar can exaggerate the impact of rising food prices. If food is priced in, say, euros, the price rises would not look nearly as great.
* Available at www.agr-outlook.org
While Borat enjoyed mocking America, last week's news from that comedy character's "home" country, Kazakhstan, was far from a joke. The price of wheat being exported from Kazakhstan, one of the world's largest exporters of the grain, rose 25% in one day. Its government had introduced export tariffs to quell domestic inflationary pressures.
The surge in Kazakh wheat prices added to a more general surge in global food prices, which rose by 38% between September 2006 and January 2008, judging by the International Monetary Fund (IMF) Food Price Index (see graph). Food prices have more than doubled since their low in July 1999.
Such substantial price increases bring winners and losers worldwide. Possibly the biggest losers are the urban poor. The poor in cities have little disposable income and have to buy their own food. But three-quarters of the world's poorest people, defined by the World Bank as those living on less than a dollar (50p) a day, live in rural areas. At least some of them could benefit from rising food prices. Farmers, even those working on a small scale, could be paid more for their produce. However, most poor households are net buyers of food.
For fund investors the surge in food prices has brought a particularly welcome bonanza (see box). With more conventional asset classes - such as bonds and equities - performing poorly, it has become more attractive to invest in assets related to agriculture. As a bonus, there are diversification benefits to be had from investing in the agricultural sector. No doubt many investors would contend that such investments play a positive social role by bringing much needed capital to the agricultural sector.
A more general impact will be the effect of rising food prices on inflationary pressures. It is likely to be greater in poorer countries, since they spend a higher proportion of their income on food. But the more food prices increase, the more inflation is likely to become a problem worldwide.
To examine the likely trajectory of food prices it is necessary to examine both supply and demand factors. It is also useful to distinguish between those that are relatively short term and longer-term effects.
On the demand side, there are several key long-term factors. First, there is population growth. More people means more mouths to feed.
Second, the developing countries are becoming richer and more urbanised. As people become wealthier they tend to eat more meat, which itself means more grain has to be used as animal feed. It takes several kilos of grain to produce one kilo of meat.
For example, China's annual average meat consumption has risen from 34kg per person in 1997 to 50kg today, according to an authoritative study from the United Nations Food and Agriculture Organization and the Organisation for Economic Cooperation and Development*. India's consumption is much lower, although also rising; increasing from 3.4kg in 1997 to 4.4kg in 2008. The average for the developed world is about 66kg. Overall, the World Bank estimates that global demand for food is likely to double within 50 years.
Finally, there is the rise of the biofuel industry. This is diverting food away from human consumption into energy production. America in particular has provided substantial subsidies to its farmers to produce biofuels.
However, demand side factors alone cannot explain rising prices. The first two factors in particular are long-term trends. Yet the surge in food prices is a relatively recent development.
Part of the explanation for recent price rises is in one-off or short-term factors such as extreme weather in Australia, Europe and north America. Many fear such problems will be made worse by climate change.
However, George Lee, the manager of the CF Eclectica Agriculture fund, also emphasises the time lag - or what economists call inelasticity - between rising demand and increasing supply. "The problem is it takes quite a while for new investment to come through," he says.
When prices were low there was little incentive for suppliers to invest. Although more investment is likely, it can take several years to set up a fully functioning farm from scratch. Investments in technology, such as genetic modification, could also play a big role in raising agricultural productivity.
Other factors not directly related to food can also have a significant effect. For example, rising energy prices can bolster food prices since agriculture can be energy intensive. Also the weakness of the dollar can exaggerate the impact of rising food prices. If food is priced in, say, euros, the price rises would not look nearly as great.
* Available at www.agr-outlook.org
Labels: economics, food, Fund Strategy
Saturday, March 01, 2008
More on Green Capitalism
Frank Furedi has written a generally positive but critical review of James Heartfield’s Green Capitalism for the February spiked review of books. On the positive side he praises Heartfield’s critique of green consumerism. Furedi endorses the view that the critics of consumerism are as obsessed with consumption as the most ardent brand junkies:
“Ironically, green protest against consumerism doesn’t represent the rejection of consumption, but rather its moralisation. From a sociological perspective, green consumption can be seen as a new form of conspicuous consumption. This is consumption for effect. Consumption apparently must no longer be an impulsive act of buying – rather it has become a massively over-examined experience, and both a moral statement and an affirmation of status and identity. In the nineteenth century, theories of commodity fetishism noted the growing tendency for people to live through things – commodities appeared to acquire a life of their own through the working of the market. In the world of green consumerism, the fetish of commodities acquires an unprecedented significance. Things are assigned human and ethical significance. Thus we have the stigmatisation of certain foods as ‘evil’ and the rendering of other products as ‘ethical’.”
However, in his criticism of the book, Furedi argues that Heartfield is guilty of reading history backwards. Furedi says that it is wrong to portray the capitalist elite as deliberately setting out to engineer scarcity:
“What Green Capitalism characterises as the ‘engineering of scarcity’ could be more usefully described as the creation of new demands. Indeed, what is most striking today is not simply the rise of the celebration of scarcity, but the growing tendency to marketise every aspect of life. Under the banner of green capitalism, more and more features of economic life are being reorganised and restructured. Everything from the emission of carbon to the air we breathe to the water we drink has been transformed into a commodity. Arguments for protecting nature are really a demand for the gradual securitisation of the environment. Powerful forces insist on transforming every object of possible use into a value, in an attempt to subject them all to the influence of market transactions.”
When I get a chance I will read Green Capitalism and make my own mind up.
“Ironically, green protest against consumerism doesn’t represent the rejection of consumption, but rather its moralisation. From a sociological perspective, green consumption can be seen as a new form of conspicuous consumption. This is consumption for effect. Consumption apparently must no longer be an impulsive act of buying – rather it has become a massively over-examined experience, and both a moral statement and an affirmation of status and identity. In the nineteenth century, theories of commodity fetishism noted the growing tendency for people to live through things – commodities appeared to acquire a life of their own through the working of the market. In the world of green consumerism, the fetish of commodities acquires an unprecedented significance. Things are assigned human and ethical significance. Thus we have the stigmatisation of certain foods as ‘evil’ and the rendering of other products as ‘ethical’.”
However, in his criticism of the book, Furedi argues that Heartfield is guilty of reading history backwards. Furedi says that it is wrong to portray the capitalist elite as deliberately setting out to engineer scarcity:
“What Green Capitalism characterises as the ‘engineering of scarcity’ could be more usefully described as the creation of new demands. Indeed, what is most striking today is not simply the rise of the celebration of scarcity, but the growing tendency to marketise every aspect of life. Under the banner of green capitalism, more and more features of economic life are being reorganised and restructured. Everything from the emission of carbon to the air we breathe to the water we drink has been transformed into a commodity. Arguments for protecting nature are really a demand for the gradual securitisation of the environment. Powerful forces insist on transforming every object of possible use into a value, in an attempt to subject them all to the influence of market transactions.”
When I get a chance I will read Green Capitalism and make my own mind up.
Labels: book, consumption, economics, environment, review, spiked
