Constant Economy: How to Create a Stable Society

Constant Economy: How to Create a Stable Society

by Zac Goldsmith

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ISBN-13: 9781848873964
Publisher: Atlantic Books
Publication date: 09/01/2010
Sold by: Barnes & Noble
Format: NOOK Book
Pages: 200
File size: 359 KB

About the Author

Zac Goldsmith is former editor of the Ecologist magazine and a Conservative elected member of Parliament.

Read an Excerpt

The Constant Economy

How to Create a Stable Society

By Zac Goldsmith

Grove Atlantic Ltd

Copyright © 2009 Ecology Grants Limited
All rights reserved.
ISBN: 978-1-84887-396-4


Step One Measuring What Matters

We have to abandon the arrogant belief that the world is merely a puzzle to be solved, a machine with instructions waiting to be discovered, a body of information to be fed into a computer in the hope that sooner or later it will spit outa universal solution ...Vaclav Havel

It's called the Information Age with good reason. We are inundated with facts, figures, surveys and statistics. On 24-hour rolling news services, on our mobile phones, our Internet home pages and giant screens at major train stations, we are constantly kept abreast of the most important stories affecting our homes, our country and our world. Yet despite this unprecedented dissemination of knowledge, we seem unable to face up to some of the most dramatic and obvious challenges that stand in our way.

In 2006, the WWF published a damning report on the UK's drain on the world's resources. If everyone on earth consumed the same resources as the citizens of the United Kingdom, it argued, we would need three planets to support us. Taking US consumption it would be as much as five planets' worth. If population doubles in forty years, as predicted, and people everywhere consumed as we do today, we would need to increase the level at which we exploit the natural world by a factor of sixteen. And if, as virtually every government hopes, we see an averge 3 per cent economic growth every year until the end of this century, global consumption of resources will increase by 1,600 per cent.

No rational person believes it is remotely possible to add this burden to the world, but the policies pursued by most governments assume it is. Why? To quote Bill Clinton: it's the economy, stupid. More specifically, it is the inability of our economists to measure what counts.

GDP: a 'grossly distorted picture'

Almost every nation on earth uses gross domestic product (GDP) to measure its economic growth. The trouble is, expressed as a monetary value, GDP simply measures economic transactions, indiscriminately. It cannot tell the difference between useful transactions and damaging ones.

So for example, if every man in Britain were to pay his neighbour for sex, we'd see a marked increase in the nation's GDP. Chopping down a rainforest and turning it into toilet paper increases GDP. If crime escalates, the resulting investment in prisons and private security will all add to GDP and be measured as 'growth'. When the Exxon Valdez oil tanker ran aground and spilt its vast load of oil on the pristine Alaskan shoreline, US GDP actually soared as legal work, media coverage and clean-up costs were all added to the national accounts.

While GDP measures what we produce, it does not have the ability to factor in the cost of what we destroy to make it. It can only add – it can't subtract. We could empty the oceans of fish, chop down every last tree, fill the rivers with poison and pollute every last breath of air, and all the time, GDP could still be rising, and the economy could still be growing.

In other words, what most of us would regard as negatives, the economy measures as positives. Ultimately, GDP tells us nothing about the kind of country we actually inhabit.

Britain, for instance, has enjoyed an average yearly rise in GDP of 2.3 per cent since 1945. But has the quality of life for the majority of people risen by the same margin? In some areas, yes. Our homes are heated; we have access to decent medicine and health care; we have more gadgets than ever. But in other areas, the answer is an emphatic 'no'. Libraries are full of books describing a deepening 'social recession' in the UK. More than 2 million Britons, for example, are on antidepressants. A million regularly take class A drugs. Self- harming has reached record levels, as has binge drinking. The Samaritans say that 5 million people are 'extremely stressed'. British children aged 8-15, meanwhile, watch an average of 13.9 hours of television every week and are, according to UNICEF, the unhappiest in Europe. The fact that some 400,000 of them are on behavioural drugs like Ritalin, suggests that childhood itself has come to be seen as a disease.

Ironically, the man who helped develop the concept of GDP in the first place, Nobel Prize economist Simon Kuznets, never anticipated its use as a measure of progress. 'The welfare of a nation', he argued in 1934, 'can scarcely be inferred from a measurement of the national income.' Three decades later, US Senator Robert Kennedy said something similar: 'GDP does not allow for the health of our children, the quality of their education, or the joy of their play,' he said. 'It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country; it measures everything, in short, except that which makes life worthwhile.'

But the pursuit of economic growth, as measured by GDP, has been the overriding policy for decades, with the effect that the consequences have often been perverse, and while economists have been telling us all the time that things are improving, reality has often been telling us the opposite.

For instance, when world leaders gathered in New Hampshire towards the end of World War Two to establish a way to rebuild the international economic system, they agreed that it would only be through world economic growth, world trade and the globalization of economic development that the poor would be lifted out of poverty.

That meeting saw the birth of the World Bank, the IMF and what eventually became the World Trade Organisation. The then US Secretary of the Treasury, Henry Morgenthau, declared 'The creation of a dynamic world economy in which the peoples of every nation will be able to realize their potentialities in peace and enjoy increasingly the fruits of material progress on an earth infinitely blessed with natural riches ... That prosperity has no fixed limits. It is not a finite substance to be diminished by division.'

Since then, economic growth has expanded roughly five-fold. International trade has expanded by 6 per cent each year, and foreign direct investment has risen about three times the rate of trade expansion. In other words, the goals were met, and many times over.

But in the same period, we have seen the emergence of a situation where a fifth of the world's people now consume roughly four fifths of the world's resources, where more than a billion people live in urban squalor, where nearly 80 per cent of malnourished children live in countries whose food base has – according to plan – been redirected towards intensive agriculture for export. All this in addition to an unfolding ecological catastrophe that threatens the very survival of our species.

The means were undoubtedly achieved, but no one can pretend we are any closer to the given end. There is something profoundly wrong in the way we measure economic growth.

Measurements that mean something

With GDP as the principal mechanism for measuring it, what we call 'economic growth' is often nothing of the sort. Take rainforests, for example. Alive and healthy, the Amazon basin provides perhaps the most important service of all. It not only harbours millions of species, many as yet unknown to science, it acts in effect as the planet's air-conditioning system – regulating temperature and rainfall, absorbing carbon and cleaning the air. Without it, the world would be thrown into turmoil – and yet alive it has virtually no recognized value.

It is only as the trees are removed and transformed into disposable goods, and as the lands are usurped by soya plantations, that the forest begins to gain recognized value. Economists are trained only to see value in nature once it has been effectively cashed in, but is that really growth? Where in our accounts are the costs factored in? Where do we recognize the almost immeasurable value of the services the Amazon provides, without which much of South and Central American agriculture could not survive?

We need to find a new way to measure growth – real growth. As the American author Paul Hawken says in Natural Capitalism, 'we need to subtract decline from revenue to see if we are getting ahead or falling behind. Unfortunately, where economic growth is concerned, the government uses a calculator with no minus sign.'

A number of organizations have tried to assemble a new tool for measuring progress. But the result is invariably a toolkit that is monstrous in its complexity and too impractical for any government to use. A neater approach would be for the government to establish a wholly independent Progress Commission, staffed by experts from a wide variety of fields: economists, environmentalists, statisticians, academics, etc. It would identify a set of key indicators for environmental, economic and social health – areas for which data can reliably be collected.

It would track signs of unhappiness like suicide and use of antidepressants, drug use and crime levels, as well as the amount of leisure time available to people to spend with their children. It would look at fish stocks, air pollution, biodiversity, energy security, food security. It would also look at living standards, income, health and access to public services. In all these areas, the commission would work closely with the Office of National Statistics, which would itself be insulated from government to ensure total independence. After all, no government in history has been able to resist the temptation to spin statistics to reflect well on their policies. Whichever indicators are selected, the results would be handed each year to Parliament and the media. The government would be required to respond.

The commission wouldn't comment on specific policies. By enabling us to judge the effect of government actions against these indicators, however, there would be an added pressure on governments to question their assumptions, and ultimately to craft policies on the basis of what really matters to people.

But beyond the measurements, how do we begin to put a realistic value on the natural world, and a cost on those things we don't want? For instance, how much is a forest, or a river worth? Clearly something. But what is the value of something we cannot do without? A stable climate, for example?

Regulation is one way, and for some problems it represents the only viable solution. Without regulation, we will surely deplete the world's oceans. But by far the most effective, and powerful tool available to governments is taxation.

A tax effectively makes an activity or a product more expensive. On the flip side, a subsidy brings its price down. It is inconceivable that we will move to a sustainable economy without a radical programme of green taxation. That doesn't mean extra taxation. It means shifting the burden away from taxing good things like employment, and towards pollution, waste and the use of scarce resources.

If that happens, companies will necessarily begin designing waste and pollution out of the way they operate. Dirty companies would be at an economic disadvantage, and ethical ones would be favoured by the market.

In principle, the British government is already committed to 'green taxation'. But in practice the change has been negligible. The actual level of green taxation has fallen since 1997 from 9.4 per cent to 7.7 per cent, even while the tax take as a whole has soared. Roughly 50 per cent of the country's tax revenue still comes from income tax. The government's own Sustainable Development Commission has described its use of the tax system as a 'significant failing'.

The overwhelming bias in the current tax system is for indiscriminate economic growth, with among other things vast tax breaks on fossil fuels.

We need a major shift in the tax bias, one that is dramatic enough to change behaviour and the way we do business. Whatever taxes are set must be set realistically, and within a realistic timescale. There is no advantage in crippling businesses. Equally, our approach must be bullish and brave. But what is key to all green taxation is a recognition that people simply do not trust governments. So wherever a tax is levied against a 'bad' activity, it must be used to bring down the cost of 'good' activities. Any other approach will rightly breed mistrust and resentment.

There will always be people who reject the very notion of using tax as an instrument of change. But tax cannot be anything other than an instrument of change. Indeed it's hard to think of any existing tax that does not have some kind of impact. Taxation is neither neutral nor objective.

And if anyone is in any doubt about the potential in green taxation to bring about change that works both for the environment and business, this book is full of specific examples of ideas that not only will work, they already do somewhere. Examples of countries that have taken the initiative; and of companies that have sought to clean up their performance and have seen huge savings as a result.

We don't have to choose between the economy and the environment. In a constant economy, the two are linked. Our challenge, then, is to reconcile them.

Voter Demand Box: Measuring What Matters

1. Establish a fully independent Progress Commission, staffed by experts from a variety of fields: economists, environmentalists, statisticians, etc. It would identify a set of key indicators for environmental, economic and social health – areas for which data can reliably be collected. Working with a wholly independent Office of National Statistics, the commission would conduct an annual audit, and require the government to respond. People would be able to judge the effectiveness of government policy on areas that matter to them.

2. A commitment to green taxation. We cannot move to a sustainable economy without a radical programme of green taxation. That doesn't mean extra taxation. It means shifting the burden away from taxing good things like employment, and towards pollution, waste and the use of scarce resources. Green taxes should never be allowed to become stealth taxes.


Step Two Power to the People

I am not one of those who think that the people are never in the wrong. They have been so, frequently and outrageously, both in other countries and in this. But I do say, that in all disputes between them and their rulers, the presumption is at least upon a par in favour of the people.

Edmund Burke, 1770

British parliamentary politics is in a depressing state. More and more people feel they have less and less control over the political process; consequently many have less and less interest in being involved in it. Rarely have politicians been trusted by the public, but never have their reputations been so low. Turnout in general elections has declined significantly and allegiance to political parties has dropped to 14 per cent. The last two elections had the second and third worst turnouts since 1900. Only 1918 was worse – and that was amid the chaos of demobilization after World War One.

The anecdotal evidence for this growing disillusionment is equally depressing: radio phone-ins fizzle with rage and contempt for the political classes; election canvassers report weary cynicism on the doorsteps; 'politician' stands alongside 'traffic warden' and 'estate agent' as a profession it is almost mandatory to despise.

You'd be forgiven for thinking that we didn't care, that the sum total of political thought in Britain was reserved for 'they're all as bad as each other' cynicism, or extremist bombast from dubious parties like the BNP which thrive on the public's disaffection. When the Commission on Parliament in the Public Eye warns that the UK is now very close to the point where a government could not claim democratic legitimacy, it's time to look long and hard at the society we have become.

Politicians can come up with gimmicky ideas to 'engage' young people like voting online or by text message, as if democracy were a series of The X Factor, but there remains an underlying assumption that we don't care, that politics is no longer important to us. This dismissive attitude misses the point entirely – we are, in fact, a highly politicized nation.

The fact that Britain doesn't engage in party politics in the numbers that it used to, does not make us an apathetic nation. A million people marched in London against the war in Iraq. Half a million people took to the streets in opposition to the ban on hunting. Millions of people are involved in community and charity work, and in 'single issue' pressure groups. It's not that we don't 'do' politics, we just do it in a different way.

The reason that fewer and fewer of us turn out to vote is because politicians have turned democracy in Britain into a superficial and disengaging process.

At the national level, politics is increasingly seen as a power game restricted to remote elites. For the 1,500 or so days in between general elections – when people can choose between two political parties with whose views they almost certainly do not agree in their entirety, and which are in any case increasingly similar in outlook – we are denied any access at all to the decision-making process. Once the polls have closed, we have no choice but to accept one often bad decision after another.

If anything the situation is worse at local level. Over the last two decades, local government has been denuded of its powers by governments of both main parties. Day after day, elected local representatives are overuled by central government on local issues, to such an extent that people wonder why they should bother voting in local elections at all. We have an absurd situation today where councillors elected on a specific platform – opposing for example a new incinerator – are then unable to vote on that issue because they are deemed to be 'prejudiced', despite the fact that they were elected to fight that very issue. The centralized nature of our politics means that local elections are not seen as important in their own right, but more often as a barometer of the national standing of the parties. For some, even that doesn't matter – as true power resides elsewhere: in Brussels. There, decisions are often made by people who are insulated from any democratic pressure at all. If poor decisions are taken there is little, if anything, the electorate can do about it.


Excerpted from The Constant Economy by Zac Goldsmith. Copyright © 2009 Ecology Grants Limited. Excerpted by permission of Grove Atlantic Ltd.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.

Table of Contents


Preface 1,
Introduction: The Case for Change, 9,
Step One: Measuring What Matters, 23,
Step Two: Power to the People, 32,
Step Three: The Precautionary Principle, 47,
Step Four: Food Quality, Food Security, 68,
Step Five: Save Our Seas, 93,
Step Six: An Energy Revolution, 106,
Step Seven: Getting Around, 128,
Step Eight: Built to Last, 143,
Step Nine: A Zero-Waste Economy, 159,
Step Ten: Playing Our Part, 170,
Conclusion, 182,
Sources and Bibliography, 188,
Acknowledgements, 193,
Index, 194,

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