Wednesday, 27 June 2012

Taking a broader view of our predicament (4)

As I flagged up last week, I want to think about money+environment this time, in particular reflecting on the second extract from Peter Selby's lecture.

Over the past weekend I spent time in my garden, working in my tiny vegetable plot which, although tiny, usually produces a lot of food (using something called the Square Foot method). I say 'usually' because the very strange weather this year has played havoc with the normal cycle of spring germination and growth of vegetable plants. As I was sowing more salads I was reflecting on what it would be like if this was all I had to eat - if what I could grow, or those in my immediate local area could grow, was all that we had. It's not so very long ago in human memory that this would have been a given - poor weather, a failed harvest, low yields, would mean hunger or starvation.

It's one of the reasons that I think 'everyone needs to know how to grow food' (as I said in my Swarthmore Lecture). Pragmatically, we need to grow food so that we can become less dependent on imports (uncertain, insecure, high food miles); but we also need to grow food to remind us, daily, of our utter dependence on the earth. In the industrialised West it's far too easy to forget this, although recent flooding and other adverse weather effects may remind us.

In the end, all of life depends on the photosynthesis of green plants, on their capacity to turn sunshine into starches. We eat the plants, we eat the animals that eat the plants, we use the timber (plants again). The energy we need, to mine metals and other minerals from the earth, also comes from plants. What we call 'fossil fuels' (oil, coal, gas) are fossilised sunshine - the results of millions of years of photosynthesis, deposited and 'fossilised' by ancient geological processes.

300-400 million years ago we were in a period called the Carboniferous – warm earth, high sea levels, lots of wet and swampy land. Trees dying fell into these swamps, they sank and were gradually transformed over millions of years – the continents continued their drift, the earth’s crust was squeezed and moved, land was buried and mountains were thrown up, intense heat and pressure took their toll . . . and here we are, several hundreds of millions of years later, using coal – coal consists of ancient trees. And, recalling their photosynthesis, they are buried stores of ancient sunshine. When coal is used to generate electricity, or directly to generate heat, we’re using up the earth’s savings account, the earth’s energy bank.

Using solar power is using our current account; burning trees is like spending what we put in a jam jar to pay the rent – we have to keep filling up the jam jar, so we can pay next week’s rent – we have to keep planting trees. Burning coal is like spending the family inheritance, accumulated over generations, and not investing it any more.

Oil (and gas) are similar, but the’re formed of sea creatures, tiny plankton and some larger creatures, that fed on green algae and sea plants, and fell to the ocean floor when they died. They were subject to the same kinds of processes as the trees – and they made not coal, but oil. Sea creatures that eat plants are further up the food chain than the plants themselves, so when they form a fossil fuel – oil – it is even denser in energy than the coal, formed directly from plants. So oil (gas) is also buried sunshine, burning it is also burning the savings account.

If we take oil and gas together, about 80% of the energy we use today comes from these fossil fuels – we’re living way beyond our means and there’s no way of putting the stuff back in the savings account – when it’s gone, it’s gone. To give you and idea of what this energy density means:

- 1 barrel of oil is roughly equivalent to 25,000 hours of human manual labour; that’s 12½ years of a 40-hour week
- a 40 litre tank of petrol is roughly equivalent to 8000 hours of human manual labour – 200 weeks of a 40-hour week
- 1 litre of petrol is roughly equivalent to 5 weeks
My father rode a camel. I drive a car. My son flies a jet airplane. His son will ride a camel. Saudi saying
We are burning each year roughly what took a million years to lay down:
In evolutionary terms, we are a baby species – anatomically modern human beings have only been around for about 175,000 years – but already we dominate the real global economy. The real economy is not that of the banks and hedge funds, it is that of photosynthesis: our entire life, our food, our clothing, our buildings . . . everything depends on green plants converting the energy of sunlight into biomass. Humanity in total constitutes less than 1% of the biomass on the surface of the Earth, yet already – at our present population level, and present distribution of technology – we use up 24% of all the products of photosynthesis. As well as current photosynthesis, our use of fossil fuels means that, every year, we are burning up the results of previous millions of years of photosynthesis, we are burning our capital as if there were no tomorrow: ‘We have built an entire civilisation on the carbon deposits of the Jurassic age,’ says Jeremy Rifkin, ‘We have to change or we have to go.’ (Swarthmore Lecture 2011, Chapter 3). 
And all this is deeply intertwined with money, with debt, and with our current global financial problems. In his lecture, Peter Selby said:
The authority to create money was in times past no different from the authority to raise an army: a sovereign act. The passing of that power, virtually unchallenged, to boardrooms is a passing of sovereign power.
Once upon a time, money used to be metal coins with the ruler's head stamped on it. Only the ruler could authorise the issue of these coins, they were made from real metal, dug from the earth, and they therefore had 'real' value - the supply was fixed, they were difficult to make, they had real scarcity value. Then we had paper money, based on this 'real' money. The £10 (or any other denomination) note in your wallet has written on it, underneath the words 'Bank of England', 'I promise to pay the bearer on demand the sum of ten pounds'. Now that Sterling is no longer tied to the gold standard, that phrase has no real meaning. There is a scene towards the end of the film Lawrence of Arabia where a tribe of Bedouin are looting a Western stronghold - a huge suitcase is opened and spills out thousands of US dollar bills. The looter throws them away in disgust as worthless - he wants only gold.

Then we had promissory notes, and cheques, and other forms of paper that stood in for paper money . . . Now we have pulses running down wires and fibre optic cables - and these pulses are 'real' money, in that they have real effects in the material world.

But as we have lost the tangibility of money, we have also lost sight of the reality of debt. Debt was originally a useful and facilitating invention. Someone with money (real money, metal coins) would lend some to someone who had insufficient, on the understanding that real coins would be returned (or real goods to the same value), with or without some extra to compensate the lender for the temporary loss of assets. This was based on both trust and on some method of enforcement. The real money and the real goods were derived from a physical economy - a 'real' economy as I've described above.

Beyond money and debt, there were other financial inventions. One of these was what we now call a futures market. The modern forms of futures trading have old roots. The Dutch tulip mania of the sixteenth and seventeenth centuries was a commodity bubble that started with an uncontrolled futures market. The vastly inflated prices were not, for the most part, being paid for actual tulip bulbs. The commodity changing hands, at ever increasing prices, consisted of pieces of paper which gave the right to purchase a tulip with a particular coloured flower if and when it was produced . . . it might not yet even exist except as an idea in a bulb breeder's mind.

Similarly today we have inflated commodity prices (food, metals, phosphate, timber, etc) because speculators buy an option on a crop, say, that has not yet even been planted. Other speculators buy and sell these options, the price of the real commodity (which might not yet exist) goes up and up - so, for instance, aid agencies can no longer afford to buy sufficient food stocks to take into a famine emergency. There was a suggestion that this form of speculation could be regulated by the requirement that the purchaser must at some point own and store the actual physical commodity . . . but the idea was abandoned because it would merely serve to create a global market in proxy-managed storage facilities!

Now we have something else altogether. At least all of the speculation and trading described so far had real, physical goods embedded somewhere in the transactions. Now we have mathematically complicated financial instruments that turn not just electronic money, but 'products' derived from electronic money, into assets that can be traded and speculated upon. If you read the financial pages of your daily paper you will come across things called 'credit default swaps' (here's a simple explanation; a more serious one; and one for geeks); or 'collateralised debt obligations' (again, here's simple, serious, geek). The details don't matter here - these, and others like them, are clever ways of gambling on a massive scale, driven by fast powerful computers that can make millions of trades (bets) in a working day, sometimes making only fractions of a penny on each transaction, but doing this so often that fortunes can be made . . . and thus, also, lost.

Each one of these layers of financial product builds on the one before like an inverted pyramid, or a giant global Ponzi scheme; each layer apparently creates more 'value' making the world 'richer' . . . but it's not real money, it's debt on top of debt on top of debt. And it appears to work as long as everyone believes in it - it's like the story of Peter Pan, where the children are all asked to clap if they believe in fairies, to keep Tinkerbell alive. If we all keep clapping, it will all be alright. It all carries on working only as long as we believe it does. This takes us right back to the start of the story of debt being based on 'trust' - these days we call it 'confidence' (and the story of the credit rating agencies wrongly and knowingly giving triple-A ratings to dodgy products is another story that would take too long to tell here). The markets are fragile, febrile things, swayed by rumour counter-rumour. If people (or institutions) start to believe there's going to be a problem, they think they won't get paid what they're owed, the panic and start to unload their debt, thus creating the problem they fear - it all comes crashing down at once. It's like the run on Northern Rock Bank - once people believed that the bank was in trouble, it was therefore in trouble.

But what happens when it all comes crashing down? All this debt has to be paid for somewhere, and in the end it has to be paid for out of the real physical economy - fuel and food and metals and timber and manufacturing and construction . . . and so on. But at its height, before the crash, the total so-called 'value' of all these constructed financial instruments being traded (gambled on) was estimated to be about six times the value of the whole world's real economy. If all the plates were kept spinning (to change the metaphor) somewhere up in the stratosphere, then it was all ok (sort of). But once just one plate had to be paid for on the earth, they all fell down. The financial crash impoverishes the whole world - you, me, us, the Chinese, Ethiopia, the local hospital, the next generation . . . everything - for years to come. The economic model says we get out of this mess by 'growth' - the world's economy has to grow, to create more real value to pay for all this virtual value.

But 'real' growth requires energy and raw materials, and we have an increasing population on a finite earth where energy and raw materials are becoming scarcer and more expensive. Growth on the scale needed isn't going to happen, and even if we had the energy and raw materials, we can't afford the climate change effects they would produce. The whole model is bust.

As the Saudi saying has it, 'my grandson will ride a camel'.

More next week on the financial crash, and more following that on the global resources issue.

Wednesday, 20 June 2012

Taking a broader view of our predicament (3)

This is the first post explicitly reflecting on Peter Selby's lecture (extracts already posted here and here).

The 'sovereign' who has the say over 'bare life' as Peter discusses in his first extract takes many forms. Historically there is the the individual tyrant who threw people into jail, tortured them, had them clandestinely murdered, or said publicly 'off with his/her head'. But of course the tyrants never worked alone, didn't do their own dirty work. They had an army of spies, enforcers, hit-men, lackeys and fixers who did their bidding, either their explicit bidding, or their implied bidding - think of: 'will no-one rid me of this turbulent priest?'

In a modern democracy it is supposedly the apparatus of the state that exercises the rights over 'bare life' - the state run police, the criminal justice system, the prisons and other forms of legal punishment. But there are questions about this arising in our twenty-first century experience. Many people feel that turning over aspects of policing or imprisonment to private companies seeking to profit from these activities is, in some ill-defined way, 'wrong'. The prerogative of the sovereign (or the state) to exercise control over 'bare life' should not, it is felt by many, be exercised by other than the state, and should not make profits for shareholders. Of course in the times of Henry VIII, say, this prerogative of the sovereign made profits for the king, as lands, estates and wealth were confiscated by the crown when someone was executed.

But there are less direct ways of impacting on 'bare life' and in this respect the state has limited power, is more like King John at the mercy of his barons - in this case the barons are the faceless markets who pull the strings of governments. Open western democracies who live by the market will also, it seems, die by the market. In The Guardian of 19 June, Simon Jenkins likens the single European currency to Colditz - a jail from which people cannot escape. We see in Greece that a quarter of the population is now in poverty; people are dying from lack of common medicines and medical equipment; elderly people are scavenging in dustbins for food; parents are handing their children over to state childcare because they can no longer afford to feed them.

And it's not just Greece. The Guardian has a series of articles about poverty in Britain, and in particular about school breakfast clubs for children. Children are arriving at school in the morning having eaten nothing since their free school lunch the previous day. Teachers speak of  'mid-week hunger' as the money runs out by Wednesday and the children arrive at school unfed [for the full series of articles, search for 'Breadline Britain' on]. My father used to speak of his childhood in the 1920s when there was nothing but bread and dripping to eat on Thursdays until the wages came in on Friday. At least the money lasted until Thursday!

The poverty we are seeing in Britain now is often in working households. Low wages, high rents, high food costs, and government cuts to benefits are all contributing. It is impossible to disentangle government ideology (the desire for a small state) from compliance with the faceless markets who will punish Britain if we don't reduce the deficit. And remember, the cuts have barely begun, the cutbacks in the NHS have barely begun . . . we ain't seen nothing yet.

Many aspects of our globalised life now impact on 'bare life'. Globalised extraction industries impact on the health, and sometimes very lives, of local people - think about uranium mining, mining for Rare Earths, tar sands oil extraction, oil drilling in the Niger Delta, to name but a few. Globalised markets sentence whole populations to poverty. Climate change - for which we all share responsibility - brings drought and starvation to societies that are already the poorest. The control over 'bare life' is now so widespread, so pervasive, that it's historical basis in 'the sovereign' is now almost irrelevant.

How we got into this mess is a long and complex story, but I believe it involves at root a serious disconnect from reality in western market capitalist societies. We are removed from direct contact with the bare necessities of life, we have lost touch with our utter dependence on the material world of the planet we live on, and furthermore, we have lost an understanding of what money is - we have been behaving as if it's magic, as if we can just wave a conjurer's wand. We have behaved as if debt can be ignored, both financial debt and planetary debt - this latter links to last week's post about Global Footprint Network being given the Kenneth Boulding Award.

I'll explore the money+environment issue next time. In the meantime, I'll just recall that more than 150 years ago (1858, in Theses on Feuerbach) Karl Marx wrote:
For the first time, nature becomes purely an object for humankind, purely a matter of utility . . . whether as an object of consumption or as a means of production.
And he also, of course, famously predicted that capitalism would collapse under the weight of its own contradictions. I recommend Terry Eagleton's most recent book, Why Marx was Right - much food for thought in our present situation.

Wednesday, 6 June 2012

2012 Kenneth E. Boulding Memorial Award

Initially, my plan for this week's post was to start reflecting on some of the issues raised by Peter Selby's lecture (excerpts published here two weeks ago and last week).

But I'm postponing that for a week to post something highly topical that was just announced yesterday - and perhaps, in any case, it isn't too far away from the concerns raised by Peter Selby.

The International Society for Ecological Economics is responsible for the Kenneth E. Boulding Memorial Award, and the 2012 award has been given to Mathis Wackernagel and William Rees, co-creators of the Ecological Footprint concept, and Global Footprint Network, the organisation that promotes the use of the concept.

I'm devoting a post to this event because Kenneth Boulding was a Quaker and the Footprint idea is something very important, that I've posted about before on this blog.

The award will be presented at the ISEE Conference 2012 in Rio de Janeiro on June 19, where Wackernagel and Rees will deliver the keynote Boulding Award lectures.

Mathis Wackernagel has promoted sustainability on six continents and lectured at more than 100 universities..

William Rees is an ecologist, ecological economist, Founding Director of the One Earth Initiative, Professor Emeritus and former Director of the University of British Columbia's School of Community and Regional Planning.

The International Society for Ecological Economics (ISEE) is a not-for-profit, member-governed, organisation dedicated to advancing understanding of the relationships among ecological, social, and economic systems for the mutual well-being of nature and people.

Ecological economics exists because a hundred years of disciplinary specialisation in scientific inquiry has left us unable to understand or to manage the interactions between the human and environmental components of our world. How is human behaviour connected to changes in hydrological, nutrient or carbon cycles? What are the feedbacks between the social and natural systems, and how do these influence the services we get from ecosystems? Ecological economics as a field attempts to answer questions such as these.

Global Footprint Network (established in 2003) is a USA nonprofit organisation working to enable a sustainable future where all people have the opportunity to live satisfying lives within the means of one planet. Humans are the most successful species on the planet, but we are using more resources than the Earth can provide. We are in global ecological overshoot.

An essential step in creating a one-planet future is measuring human impact on the Earth so we can make more informed choices. The Ecological Footprint is a resource accounting tool that measures how much nature we have, how much we use, and who uses what. It is a data-driven metric that tells us how close we are to the goal of sustainable living. Footprint accounts work like bank statements, documenting whether we are living within our ecological budget or consuming nature’s resources faster than the planet can renew them.

Kenneth E. Boulding (1910-1993) was a leading systems thinker who integrated social theory with the natural sciences and moral philosophy. He was a provocative critic of the fragmentation that characterises modern scholarship. Yet his creativity, seminal ideas, and constructive engagement with the scientific community were widely recognised, resulting in his being elected President of the American Economic Association and of the American Association for the Advancement of Science. Kenneth and his wife, Elise Boulding, herself a renowned sociologist, were Quakers who actively contributed to the international peace movement. The award is given in honour of people who exemplify aspects of the special character of Kenneth E. Boulding with the hope of perpetuating his many individual strengths that combined into wisdom among ISEE members and beyond.

A memorial note, published when he died (in 1993) tells us:

Kenneth E. Boulding was a most extraordinary economist. The narrow bounds of the economics discipline could not contain his interests and talents. In addition to economics, Professor Boulding made important contributions to the fields of political science, sociology, philosophy, and social psychology. His forays into subjects outside the usual concerns of economists were not an intellectual dilettantism; rather, they were a result of his conviction that an understanding of human behavior can only be accomplished by studying man in his totality.

Kenneth Boulding was born in 1910 in Liverpool, England. He graduated with a Oxford first in economics in 1931. That same year, a short paper he had written on displacement costs was accepted by John Maynard Keynes for publication in the Economic Journal. Following a year of postgraduate work at Oxford, Boulding used a Commonwealth Fellowship to study at Chicago and Harvard. After some years at Edinburgh, he settled in the United States for good, eventually at the University of Colorado.

Raised a Methodist, Boulding became an active Quaker and a committed pacifist. In 1942, he composed a circular opposing World War II, and in 1965 he helped to organise the first anti-Vietnam War teach-in. However, merely witnessing against war was insufficient. Boulding believed that war could only be eliminated by understanding why it occurs. Conflict and Defense is his major contribution to peace research, and he also was instrumental in the founding of the Journal of Conflict Resolution.

Boulding's belief in the Inward Light found expression in the concept of integrative systems. He identified three types of social systems: (1) exchange systems, in which activity is organized through the market mechanism, (2) threat systems, in which desired behaviour is brought about by the threat of losses in welfare, and (3) integrative systems, or love systems, in which an interdependence of utility functions produces a situation where ‘what you want, I want’. These three systems are driven by different motives. Self-interest is the motive behind exchange systems while fear and love are most important in threat and integrative systems. It is in the integrative systems that our heroic nature - passionate, selfless behaviour - is exhibited.

All three of these are necessary for society to flourish. Our economy is dominated by exchange. A threat system supports the legal order necessary for social stability. Our economy also depends on integrative relationships. For example, trust and honesty are needed for the development of the financial system. One of the insights to which Boulding's emphasis on love systems leads is that the failure of the integrative system of a country to develop concepts of mutuality, trust, honesty, and community beyond the family is one of the major obstacles to economic development.

One of his most interesting later works, Three Faces of Power, employs these three social organisers as the three categories of power. Contrary to the presumption of deterrence theory, threat power is not effective unless it is reinforced by economic and integrative power. And whereas he had earlier expressed a mistrust of the coercive power a world government would enjoy, Boulding now sounded optimistic about the possibility of a world government based largely on integrative power.

The book, Three Faces of Power is probably the one of his publications most well-known to Quakers. Kenneth and Elise were Friends in Residence at Woodbrooke during the summer term of 1989, a few months after I first arrived to work here.