The G20 Summit and the Environment

Just ahead of the G20 economic summit in Washington DC, I saw that GW Bush made a statement that there was nothing wrong with Capitalism. Now it would be far to easy to ridicule or satirise this, and am I tempted. However, the reality is that George W, like so many other people who have been winners under a capitalist system are driven by ideology rather than the facts. The recent events show that Capitalism is a great idea, but just fails to work in practice.

It is a good job that GW is leaving soon, well perhaps after a few months of unemployment will bring him back to reality. After all even amongst republicans he is not well liked, so I doubt that anyone will let him control anything. Unless they want and need someone that only got the job because of Daddy, is capable of starting Illegal wars, And can run up an eye watering deficit.

However, all joking aside, it was astute of the President elect not to attend the G20 summit. As the US system has the election nearly three months before gaining office, it would have been like having two Presidents. Barack Obama does have an observer there, so it will be possible for the new US administration to act once he gains power, but for now this is a GW Bush show.

I have spoken before that we need to create a green economy. That is not just about using renewable energy, or stopping pollution, but is about ensuring that every cost of an economic activity is taken into account. For instance when something is manufactured it produces waste, Carbon Emissions, uses and pollutes water. All these costs need to be incorporated into the cost of making that product. Often these are costs burdens that lay outside of the cost of manufacture. Also for each product there has to be an understanding of how the product will be disposed of and recycled.

Now under conventional capitalist thinking this adds costs, and in the short term that could be true, but in the long term the hidden costs are greatly reduced. As with a green economic system the item would be made to last longer. Thus the capital cost of the original purchase price is spread over a greater number of years. Unlike the current situation, items like washing machines or refrigerators are discarded rather than repaired. As this cost is often paid for by the community via waste collection taxes currently this should lead to lower costs. Further, this greening of the economy will help to create jobs, the man (or woman) that comes to repair the appliance.

Already I can hear people saying but what about the loss of jobs from the shops selling all these appliances, well yes that will mean smaller sales volumes, but if people don't have to keep replacing a washing machine every three, four or five years then people over all will be wealthier. That is an important principal of Green Economics that it benefits everyone not just a few.

Equally important will be using science to to asses the impacts of products. As science moves forward and discovers more it is inevitable that products that we thought were beneficial will be discovered to be damaging. That will still happen as the economy greens, but there will be fewer scandals where a company knew there was a likely problem but covered it up for the sake of profit.

This is even more important in the areas of food and water. Many of the chemicals that are used to provide increased yields do have a serious effect upon the environment. But it is not the chemical companies that foot the bill but the government and the community. Equally, all of these chemicals have a health effect. Some may not be discovered for years and again in the current situation it is not the manufacturer that bares the cost, but the individuals, the community or the government.

With water the problem is even more acute. Even in developed countries water bares the traces of the chemicals used in agricultural production to a greater or lesser extent. Here in Europe that was recognised as a problem twenty years ago and the problems have been tackled more comprehensively than has occurred in the rest of the world. However, with a green economy the costs would move from the consumer to the chemical companies and the agri businesses, thus making sure that the people creating the pollution are the ones that will actually pay the costs. That will lead to the farmers that produce food without pollution will be cheaper and make greater profits. This could also reduce the subsidy costs of agriculture. There will never be a time when agricultural subsides will end, as every nation will have to ensure that it maintains some ability to feed its people.

On the subject of subsidies, I really did think that I was in a dream when I heard of the bail out of the banks in the US. Had Bush had a converted to Socialism? Not at all, no matter what the complexion of a particular administration and its Ideology, all governments have to support various sectors of the economy from time to time. This time it was the banks, and while I think the way it was done was wrong, the economy in America and the rest of the world needed that support. As quite simply no system is perfect, not even a green economic system. However, it is and will be better than what we have at the moment.

Just this week on the local news following a story of how the economic crisis has lead to an increase in unemployment, was a story regarding a shortage of people following engineering apprenticeships and that there is a steady demand for these skills. Then was a further story that renewable technology companies are expanding. Now if this is not a clear sign that greening the economy provides real benefits, then I don't know what is.

With green economic solutions, the greater good has to be at the core of any economic activity. Far, to often current economic activity benefits just a few. One of the aspects of policy that Gordon Brown is talking about doing is to provide a Fiscal Stimulus (Why does that sound like a tribute band?) is to ensure that the poorer get more cash. As the poor will spend any cash they get this goes straight back into the economy rather than when the upper middle classes or the rich get tax cuts, they tend to save the money. Thus the British government is thinking about taking the right actions.

While at the moment there is still an emphasis upon the old style economic thinking that has got us into this mess going on, this economic crash has provided the planet the opportunity to really find the solutions to climate change and environmental degradation by adjusting the way that the economy is run.

At the moment everyone is still talking about growth as the solution. But an ever expanding economy is just not possible as we have finite resources. Growth is only appropriate to developing nations, what the developed nations need to do is develop an economy that is steady and stable. While growth is the appropriate measure for a developing economy as a way of calculating the base line of economic activity, it lacks the sophistication needed for a developed economy.

Further, as this base line of economic activity measures spending on all the things we want to get rid of as a society, then as a measure it is useless. For example in Britain there have been various incidents of flooding. This caused extra expenditure on renting other homes by those effected, the extra spend on hotel rooms, the costs of cleaning up and rebuilding all add to the way the growth in the economy is measured. Had there not been the flooding in the first place then that expenditure that counted towards growth would not have occurred. Surly it would be better not to have the flooding in the first place? Yet the other side of that coin is the flood mitigation. One of the known factors that is enabling flooding to happen is the loss of trees and hedges. Yet the economic activity of removing the trees, either for timber or just to enlarge fields for agriculture is counted towards growth. But leaving them in place to act as rainwater sponge is not.

Equally an example could be a coal mine that pollutes the water supply. While the coal extraction operation keeps polluting the water company has to spend more to clean up the water both add to the measure of economic activity that is growth. Yet stop the pollution the water company spends less on providing safe water that leads to a fall in the economic activity that counts towards growth.

The measure is far to simplistic to be of any real use in a developed economy. But it suits business as an easy way of making short term profits and politicians as a way of deceiving us that things are getting better. For a minority their economic status did improve, but for the majority that was an illusion. While property values were apparently rising, people felt as though they were better off. However, they misunderstood that while the value of their home had risen, so had the price of any they wanted to move to. Thus if they wanted to move it was likely they would need to borrow more. This in turn meant that to earn more people were having to work longer hours, or do two jobs or any number of things to effectively stay still economically. All very good for the over simplistic growth in GDP, but quite bad for the poor folks having to work their socks off.

As property prices continued to rise then ordinary working people had to buy or rent further away from their place of employment. The increase in traffic and journey times all contribute to the measure of economic growth via more fuel sales, more cars and the capital expenditure on the infrastructure of roads. Yet again the negative aspects of this activity actually counts towards the growth of the economy. The increases in medical expenditure for treating respiratory problems, treatment for the injuries of road accidents are all measured as an economic positive.

Therefore, any plan that the G20 comes up with needs to be much more sophisticated than just going for growth, it needs to be ensuring the growth is in the areas that are most needed for a sustainable future. That will be different for each of the twenty nations, but just following old outdated and failed methods will not work. Equally, there needs to be a major reform of the international financial systems like the World Bank (WB) and the International Monetary Fund (IMF). Both institutions were formed as part of the way the world needed to rebuild after the second world war. Well that was sixty years ago when economic growth was the order of the day. Just as when building a house you stop when the walls and roof are up, the WB and the IMF needed to change decades ago and stop being puppets of the western developed nations.

The WB and IMF have been environmentally disastrous for many developing nations. Often telling everyone to plant and grow the crops that the west will buy, like coffee, until there is a total collapse in price and these developing debtor nations then need to borrow more money to repeat the cycle all over again. To me it is no wonder that in some nations there is such a resentment towards the western developed nations.

We all have to think in the long term, beyond any period that a politician is in office. With all the talk of the history that was made by America having elected Barack Obama president, it struck me that the real history will be made quietly if we can find a truly fair and sustainable global economic system.