There is something fundamentally wrong with treating the Earth as if it were a business in liquidation.
Herman Daly, Former Senior Economist,
Environment Department, World Bank
Adam Smith's book, the Wealth of Nations printed in 1776 extolled the free market. In the book he suggests that an ‘invisible hand' would ensure that society turned out well if everyone simply sold what they had to sell, and bought what they wanted, without worrying too much about creating any particular kind of society.
But Smith added two conditions. (He was a moral philosopher before he was an economist). He felt that human beings were morally constrained by ‘natural sympathy'. In other words, he knew that for example, in any one village, three of four pubs might vie for trade. But no individual publican had any desire to be the only pub in town, or the only one in the land, at the expense of all the others. To Smith the free market was as cooperative as it was competitive.
Smith feared that corporate interests would be the enemies of the free market, explaining that for the ‘invisible hand' to work, the market had to be ‘ideal': an infinite number of traders and an infinite number of buyers, all with complete information and total freedom of choice.
Wealth - Money, Power, Energy, CO2
By the end of 2000, the top 20% of the world's population controlled 86% of the world's gross domestic product (GDP), whilst the bottom 20% had just 1% and the gap between the wealthiest and the poor is increasing. Individuals and corporate families listed in the US and UK rich lists include people with obscene levels of wealth. For example, Bill Gates has a personalwealth of over $56 billion dollars, the family that own Ikea $33 billion, the L'Oreal owner $20 billion and Christy Walton's family - owners of Wal-Mart $16.7 billion dollars.
In the UK the three richest people Lakshmi Miltal (Miltal Steel) has a stated wealth of £27,700 million, Roman Abramovich (oil and industry) £11,700m and the Duke of Westminster (property) £7,000 million.
To amass wealth at the expense of the weak is a false and dismal science. It spells death. True economics stands for social justice and moral values.
Mahatma Gandhi - The Harijan 1937
After the Second World War, John Maynard Keynes proposed a radical overhaul of money. He suggested that international trade be settled in a new ‘currency', and that holders of that currency would incur negative interest. That means the money earned by a successful exporting nation would always be diminishing in value, so it would be natural to spend it as quickly as possible, and so boost the exports of other nations. Under this system, wealth and development is automatically shared between nations. Instead, the current system forces the poor nations borrow the rich nation's money and pay them interest while trying to develop. A formula that makes the rich grow richer and the poor grow poorer.
In 1982 there was approximately £10.5 billion in circulation in the UK as cash (notes and coins). Retail and wholesale deposits - i.e. bank money - amounted to almost fourteen times as much: £144 billion. By 2005 the cash figure was £38 billion, whilst the bank money had grown to £1,289 billion (Office for National Statistics, May 2006) - more than twice as much in real terms.
So for every £1 circulating in cash in 2005, £34 took the intangible form of bank money, or deposits. The principle of fractional reserve banking means that even when most of the customers' money has been lent out again, it is still counted as a ‘deposit' in the Bank's computer or ledger. That money can then be deposited again in another Bank and so the total amount of ‘deposits' can keep on growing by being lent out and deposited again and again without a single extra coin or note being issued by the Bank of England. However, each time a new loan is made it has to be paid back with interest.
Economic life requires a ready supply of money to facilitate exchanges between buyers and sellers, but when most of it is created in this way through the creation of debt. The subsequent need to pay interest on that debt drives a form of economic growth in which the finite resources of the earth, and the labour of the poorest people, are exploited to pay back the interest.
The part played by orthodox economists, whose common sense has been insufficient to check their faulty logic, has been disastrous to the latest act.
J. M. Keynes (1936) National Self-Sufficiency, 1933
Wealth and prosperity, measured in financial terms are closely related to energy consumption. The energy poor, are currently living on the credit sheet, whilst the wasteful and rich developed nations of the world are creating a huge energy imbalance. The longer we ignore the inequity the higher the price that will eventually have to be paid. The bitter irony is the world's poor are likely to be the first and worst hit, by the climatic impacts generated by the actions of the energy rich.
Current economic thinking is that, occasional recessions notwithstanding, the global economy will grow by about 3% a year this century, which means a doubling of economic activity every twenty-three years.
This fantasy is turning into a nightmare and it is time to recognise the need to live within the limits of natural resource supply.
According to the Association for the Study of Peak Oil (ASPO) a peak in world oil supplies (ie the point where discovery rates become less than extraction rates) is likely to occur sometime between 2008 and 2010. Some analysts believe we may have already passed the peak. It seems certain however that within a few years, the effects of rising energy prices will reveal the scale of the decline. ASPO calculate the rate of decline after peak to be about 2% per year. That may not sound too drastic, but the reduction in production arrives at the point where developing economies are planning to boom, and the rich-world's economies such as China and India run on the idea of growth and promotion of consumerism.
As the price rises, the sectors that are now almost wholly dependent on crude oil - principally transport and farming - will falter and contract.
Bankers Goldman Sachs and Morgan Stanley have indicated that the price of a crude oil is likely to rise to $200 a barrel or above. The last five recessions in the US were all preceded by a rise in the oil price. Financial analysts have begun to discuss the impacts of oil at $600 per barrel. Such a price rise will disrupt the economy in ways never before seen.
Contraction and convergence
Contraction and Convergence (C&C) is a system designed to allocate, on an equal basis CO2 to all humankind. The over-consuming countries require an adjustment period to contract their CO2 emissions, while developing countries are able to increase to some extent (until convergence occurs).
After Convergence each country would receive the same allocation of CO2 emissions permits per head of its population at some agreed base level for the year. Those countries, unable to live within their allocation would be able to buy more permits from countries, which ran their economies in a more energy-frugal way. The theory is that this would allow a steady flow of purchasing power from countries that have used fossil fuels energy to become rich to those still struggling to break out of poverty. C&C would thus not only shrink the gap between rich and poor but also encourage the South to develop along a low fossil fuel-energy path.
The over-consuming industrialised nations, which have cause the warming problem invariably argue that the market should be left to correct the imbalance.
"To begin with, we must acknowledge that climate change is the greatest market failure the world has ever seen. Greenhouse gas emissions are an externality, affecting the lives of others, with people not paying for the consequences. It is therefore not enough to say leave it to the market, the market has already shown it has failed ".
David Cameron MP - Conservative Party Leader - Do Good Lives Have To Cost the Earth? 2008
Carbon offsetting is an example of how distorted the market is and how little economic thought is grounded in the value of life or natural resources.
Carbon offsetting is being promoted as a tool to remedy the creation of CO2. Yet, the market is failing because our economic system has historically been set up to price human labour, natural resources and now carbon very cheaply. The economic system has not yet been re-designed to reflect the value of a stable climate.
Concentrations of greenhouse gases should be stabilised at 350 parts per million (ppm carbon dioxide equivalent) in the atmosphere.
The former World Bank economist Lord Stern has calculated that meeting a less stringent target of 500 ppm would cost 2% of World gross domestic product. However, scientists are concerned that 500 ppm, would warm the world by approximately 3%, which may trigger methane and feedback loops that could lead to runaway climate change. Many leading academics are now suggesting that t a cut of 80%, to 350ppm would be more appropriate.
For the economy to deliver lasting carbon emission reductions via offsetting and other forms of trading, the price of carbon will have to represent a form of democratic wisdom that is not yet visible in the actions of our politicians or the market.
For example, British Airways argues that there is no need to reduce the amount we fly because the airline can buy up more ‘carbon credits'. Carbon offsetting takes no account that:
- It would be environmental suicide for the whole world to fly as much as people in the UK currently do.
- Cuts now are vital now. 'Zero' (assuming 350ppm) means a serious curtailment of generating activity.
- C02 doesn't go away, it's just being given a financial value. It only works if it acts as a genuine incentive to cut carbon.
- Offsetting doesn't make flying 'OK' any more than giving to Amnesty gets you a licence to torture. The idea is the wrong way round - supporting emission reduction schemes is good - believing you can pay for emissions, if you have no intent to reduce carbon emissions undoes any potential good.
To meet the dramatic greenhouse gas reductions needed to bring climate change to a manageable level (assuming 350ppm), we will need to use every available method to save emissions and soak up CO2 and this will not leave sufficient scope to simply carry on a business as usual scenario.
Clearly the pricing structure for C02 would be hugely different to the financial calculations currently being considered by those promoting the auctioning of carbon credits. If the system is to work, carbon credits will have to purchase credits within a global CO2 framework with an overall cap on emissions for corporate organisations.
"It's sheer ideology to assume that society should be based on competition alone, to pretend that competition and untrammelled capitalism are the natural state of humanity and the condition for our survival. If that premise is false, as I believe it is, then virtually everything else in our society is organised to be dysfunctional."
Susan George - Transitional Institute.
Transnational Institute - PO Box 14656 - 1001 LD Amsterdam, The Netherlands. www.tni.org.uk
Land, food, lifestyle
More than 70% of the world's population, are virtually excluded from any benefits of the global economy. The Peruvian economist Hernando De Soto has been travelling the world explaining to the leaders of developing countries how to give poor people formal ownership rights to the land they live on, so that they can trade. In Peru more than 300,000 personal businesses have been formalised and employment for 600,000 people created.
James Tobin, a Nobel laureate in economics proposed the idea that tax transactions could be placed on international currency markets which now amount to more that $1.5 trillion dollars a day. These foreign exchange transactions have virtually nothing to do with financing the real economy. For example, in 1997, HSBC stated that it made $3.3 million a day from currency speculation ($792 million, based on 240 trading days) and in 1998, Nat. West (now Royal Bank of Scotland Group) made $265 million profit from currency trading
With an income generated by a tax on speculation the UN would for example be able to fund the worldwide elimination of leprosy diphtheria and the provision of medicines for HIV/AIDS and all the significant impacts of poverty. We would also likely see better management of the high risk gambling which led in part to the recent financial crises.
Cancelling the financial debt as well as tackling global warming allows us to put in place systems that improve our lives, at the same time as saving lives in poor areas of the world.
The economy must be driven by the imperative to conserve valuable carbon permits and to pursue zero-carbon enterprises.
Those of us who live in the privileged and exploitative economies of the West can all play a part in bringing about a transformation to the international finance system. We can do it by in-creasing our understanding of the system. And we can it by declining to dance to Finance's tune. After all, the finance sector depends on us, the world's debtor-spenders to come to the ball. We can turn down the invitations. We can decline the credit card overdraft or loan. We can live within our means.
Anne Pettifor, Jubilee 2000 - Debt Relief Campaigner
- The New Economics Foundation (NEF) www.happyplanetindex.org/
- Jubilee Debt Campaign - The Grayston Centre, 28 Charles Square,
London, N1 6HT. Tel: 0207 7324 4722 www.jubileedebtcampaign.org.uk
- Christian Aid - 35 Lower Marsh, London SE1 7RL
Tel: 020 7620 4444 - www.christianaid.org.uk
- New Internationalist - Tower House, Lathkill Street, Market Harborough, LE16 9EF Tel: 01858 461739 www.newint.org
"Whether good lives are defined as happy lives or lives of well-being, the bottom line is this: that living a good life and safeguarding the climate are not only simply compatible, they are inextricably connected and mutually dependent.
In other words, it serves both our well being and the well-being of the planet to radicallyreform our deeply unsustainable economic system, based on the ever increasing consumption and waste, of natural resources."
Caroline Lucas - Green MEP.
1. Promote the Tobin Tax campaign and support the Trade Justice Movement
Comic Relief's Big Red Nose day in 2007 raised £68 million, the Sports Relief event of 2008 raised £21 million and since 1985 the charity has involved hundreds of thousands of participants and donors in generating £500 million.
Just imagine if all the people taking part in these events demanded their MP's deliver real change. Lobby your MP to deliver aid and economic change at the level it is really needed.
If you are a member of a Political Party or Trades Union, get your local Branch to propose a motion in support of the Tobin Tax Campain to the Annual Conference.
Tobin Tax Campaign (tax on international currency markets)
Investing in Freedom (Pensions and investment campaign)
War on Want - Fenner Brockway House, 37-39 Great Guildford Street,
London, SE1 OES. Tel: 020 7620 1111. www.warnonwant.org
Bank Watch: www.bankwatch.org
Trade Justice Movement - c/o Oxfam, 274 Banbury Road, Oxford, Oxfordshire, OX2 7DZ.
Tel: 0870 010 8707. www.tjm.org.uk
Sports/Comic Relief - 5th Floor, 89 Alebert Embankment, London, SE1 7TP.
Tel: 020 7820 5555. www.comicrelief.com
2. Demand the Government raise the necessary income to pay for a low carbon future
The need for a switch in economic priorities is enormous and the opportunity must be seized now.
Like the UK, Norway has its own reservoir of fossil fuel wealth. However, unlike Norway the UK is wasting its inheritance. Norway has a national pension fund, which at the end of 2005 was worth $210 billion, or more than £20,000 per person living in Norway. The fund is generated by a tax on the income of the oil companies operating in Norway. The UK Government taxes the tobacco industry heavily to reduce consumption and cover the impacts of tobacco on health. However, it has consistently backed down on taxing oil, most famously on vehicle fuel.
The oil companies are generating record profits and yet companies like BP and Shell are investing huge sums of money in exploring for more oil, rather than making a wholesale shift to safe, renewable energy.
In 2004, BP was directly responsible for eighty two million tonnes of greenhouse gases (CO2 equivalent) entering the atmosphere from its production cycle, and a further 1,376 million tonnes from the use of products it sold. That means 6% of global greenhouse gas emissions can be traced to this one company.
A windfall tax is a tax on sudden large profits that a company earns due to a change outside its control. In the case of oil, a windfall tax would be focussed on transferring unearned super-profits created by the rising awareness of peak oil and climate change.
Appreciating that the sale of oil and gas at a high price generates a once only opportunity to raise revenue necessitates that the revenue is used to create a localised energy system that has energy conservation and carbon reduction as core principles. The New Economics Foundation has made suggestions for how such revenue could be used:
- Development and the promotion of micro, and medium-scale renewable energy technologies with the necessary redesign of the UK's incredibly inefficient national energy grid
- Advice to help local planning authorities with the complexities of managing new, decentralised renewable energy services and technologies
- Advice services to help householders who want to adopt small-scale energy technologies and find their way through local planning requirements
- Supporting standards for sustainable homes
More general and continuos revenue from energy taxes should then be allocated to further energy saving and renewable energy projects and to adapting to the unavoidable consequences of climate change to which we are already committed.
New Economics Foundation (NEF) - 3 Jonathan Street, London, SE11 5NH.
Tel: 020 7820 6300. www.neweconomics.org
3. Invest and use your own money ethically
In a world where high-risk speculation means investments in arms, tobacco, drugs, genetically modified crops, there is an increasing number of ethical funds that can help you save and invest with a conscience.
Triodos Bank has a Charity Saver account, which allows you to donate a proportion of their interest to one of 20 charities.
The Co-operative Bank and the Charities Aid Foundation are project partners in a bank that makes loans solely to charities.
Shared Interest is a co-operative lending society that aims to reduce poverty in the world by providing fair and just financial services. They have been part of the fair trade movement for 17 years and work extensively with community-based businesses in Africa and other continents to help them make the most of fair trade.
They work primarily by providing finance up front to producers, often via their buyers, to enable them to buy raw materials, tools and the other things they need at the time they need them. They currently have more than 8,500 members who have invested over £22 million, making a range of financial services available to fair trade producers and the businesses that buy, market and retail their goods.
Shared Interest - No.2 Cathedral Square, The Groat Market, Newcastle-Upon-Tyne, NE11 E10. Tel: 0191 2339100. www.shared-interest.com
The Ecology Building Society provides ethical mortgages and actively supports projects that support the local economy. Naturesave can assist you with ethical insurance.
Ecology Building Society - 18 Station Road, Cross Hills, Keighley,
W.Yorkshire, BD20 7EH. Tel: 0845 674 5566. www.ecology.co.uk
Naturesave Insurance - 58 Fore Street, Totnes, Devon, TQ9 5RU.
Tel: 01803 864390 - www.naturesave.co.uk
Many places still have a local mutual Building Society, originally set up to help local people own their own homes. As a customer and member, you are an equal owner of the society and can attend members' meetings and challenge the management and Board of Directors on their environmental policies.
4. Join or set up a credit union
A credit union is a financial co-operative, owned and controlled by its members. Each Credit Union is based on a ‘common bond' which members share - often living or working in a particular locality, belonging to a particular organisation, or working for the same employer. Credit unions offer annual dividends on savings of up to 8% and make low interest loans to their members. Over 100 million people internationally are members of credit unions including around 20% of the population of Ireland.
Assoc. of British Credit Unions - Holyoake, Hanover Street, Manchester, M60 0A. Tel: 0161 832 3694. www.abcul.org
5. Join or set up your own Local Exchange Trading System (LETS) and create your own local currency.
LETS are local community-based mutual aid networks through which people exchange all kinds of goods and services with one another, without the need for money. At least 40,000 people are involved in the 450 LETS schemes in the United Kingdom.
Local Exchange Trading Systems - UK - 12 Southcote Road, London, N19 5BJ.
See Transition Towns for other local currency/trading initiatives
Big companies have shareholders and joining or supporting the increasing numbers of people protesting about the injustice and lobbying these institutions for structural change is one important way to learn and create real change. At a local level, trading schemes and ethical investments can make your money work for the community.
- Unlock Democracy incorporating Charter 88
www.localworks.org Local Works - C/O Unlock Democracy, 6 Cynthia Street, London N1 9JF. Telephone: 020 7278 4443 www.unlockdemocracy.org.uk/
- Corporate Watch - 16b Cherwell Street, Oxford, OX41 1BG. Tel: 01865 791 391. www.corporatewatch.org.uk
- Clean Investment Campaign - Campaign Against the Arms Trade - 1 Goodwin Street, Finsbury Park, London, N4 3HQ. Tel: 020 7281 0297. www.caat.org.uk
- Institute for Liberty and Democracy - Las Begonias 441, Ofician 901, San Isidro, Lima 27, Peru. www.ild.org.pe
- Bretton Woods Project c/o Action Aid, Hamlyn House, Macdonald Road, London, N19 5PG. www.brettonwoodsproject.org/
- Ethical Consumer - : ECRA - Unit 21, 41 Old Birley Street., Manchester, M15 5RF. Tel: 0161 226 2929 www.ethicalconsumer.org
- Tridos Bank - Brunel House, 11 The Promenade, Bristol, BS8 3NN. Tel: 0500 008 720. www.tridos.co.uk
- The Co-operative Bank - UK - PO Box 101, 1 Balloon Street, Manchester, M60 4EP. Tel: 0845 600 6000. www.co-operativebank.co.uk and
Charity Bank - Tel: 01732 520 029 - www.charitybank.org
- Charities Aid Foundation - 25 Kings Hill avenue, Kings Hill, West Malling, Kent, ME19 4TA. Tel: 01732 520000. www.cafonline.org
- Co-operative and Community Finance - Brunswick Court, Brunswick Square, Bristol BS2 8PE. Tel: 01179 166750 - www.icof.co.uk
- Community Development Finance Association - Room 101, Hatton Square Business Centre, 16/16a Baldwins Gardens London EC1N 7RJ
Tel: 020 7430 0222 - www.cdfa.org.uk
- Building Societies Association - 6th Floor, York House 23 Kingsway, London, WC2B 6UJ Tel: 020 7520 5900 - www.bsa.org.uk
- Ethical Investment Research Information Service - 80-84 Bondway, London, SW8 1SF. Tel: 0207 840 5700 - www.eiris.org
- The Transition Handbook - Transition Towns Movement - an evolving exploration into the head, heart and hands of energy descent. www.transitiontowns.org.uk
- Permaculture Publications - Hyden House Ltd., East Meon, Hampshire, GU32 1HR. Tel: 01730 823311. www.permaculture.co.uk
- Powerswitch - P. O. Box 178 Carshalton, SM5 2XY.
Tel: 0208 1232500 www.PowerSwitch.org.uk
- Community Supported Agriculture - c/o Food and Farming Dept, Soil Association, South Plaza, Marlborough Street, Bristol BS1 3NX
Tel: 0117 914 2424 www.cuco.org.uk
Global military spending rose 3.5% to $1.2 trillion dollars. In 2004 and continues to rise. Oxfam reported in April 2008 that total overseas aid in 2007 was $94.4 billion, less than one tenth of global military spending.
At the end of 2006 there were an estimated 39.5 million people living with HIV worldwide. There were 4.3 million new HIV infections in 2006 and 2.9 million AIDS-related deaths. 68% of adults and 90% of children living with HIV are in Sub-Saharan Africa. 1.7 million new infections occurred in 2007 and the adult prevalence across this region is estimated at 5%. AIDS deaths in 2007 were the largest cause of mortality in the region.
The Global Fund to Fight HIV/AIDS, TB and Malaria has now distributed $8.6 billion in grants to 136 countries. It has enabled 1.1 million people to get treatment for HIV/AIDS, and has distributed 30 million insect treated bed nets to protect people against malarial mosquitoes. Compare this against the USA arms export figure of $18.6 billion, Russia $4.6 billion, France $4.4 billion and the UK $1.9 billion.
6. Give your support to any of the campaigns that strive to tackle the underlining causes of poverty and conflict
The squandering of financial and human resources on war prevents us from tackling climate change and creating global security and equity for the people of the world.
Increasingly the military will be called upon to support civil society as it struggles to tackle the environmental catastrophes that will unfold before our eyes.
For the cost of just two stealth bomber planes, 48 million children in Africa who have never had the chance to learn to read or write could attend school for a year. The scale of economic distortion created by the Military is without parallel.
Nothing is more precious than a child's life, yet millions of children are left to die needlessly every year. It's simple to save a child's life; we just need to act. Save the Children charity says, "they are outraged that 10 million children under the age of five die every year, mostly from preventable illnesses. In the 21st century, that's just wrong. "
For further information
- Peace Tax Campaign - Archway Resource Centre, 1b Waterlow Road, London, N19 5NJ. Tel: 0870 7773223. www.conscienceonline.org.uk
- Campaign Against Arms Trade - 11 Goodwin Street, Finsbury Park, London, N4 3HO. Tel: 020 72810297. www.caat.org.uk
- Movement for the Abolition of War - 11 Venetia Road, London, N4 1EJ. Tel: 020 8347 6162. www.abolishwar.org.uk
- Mark Thomas Comedy Product -
Tel: 0845 610 2233. www.mtcp.co.uk
- Campaign for Nuclear Disarmament - 162 Holloway Road, London, N7 8DQ. Tel: 020 77002393. www.cnduk.org
- Network for Peace - 5 Caledonian Road, London N1 9DX. Tel: 020 7278 3267 - www.networkforpeace.org.uk
- Peace Education Network - www.peaceeducation.org.uk
- The Woodcraft Folk - 13 Ritherdon Road, London SW17 8QE. Tel: 0208 672 6031 - www.woodcraft.org.uk
- Save The Children - England - 1 St. John's Lane, London, EC1M 1AR. Scotland - Prospect House, 2nd floor, 5 Thistle Street, Edinburgh, EH2 1DF.
Wales - Phoenix House, 2nd Floor, 18 Cathedral Road, Cardiff, CF11 9LJ. Tel: 0207 0126400 - www.savethechildren.org.uk
- Terence Higgins Trust - 314-320 Grays Inn Road, London, WC1X 8DP.
Tel: 0845 1221200. www.tht.org.uk
- War on Want - Fenner Brockway House, 37-39 Great Guildford Street,
London, SE1 OES. Tel: 020 7620 1111. www.waronwant.org
- Trade Justice Movement - c/o Oxfam, 274 Banbury Road, Oxford,
Oxfordshire, OX2 7DZ. Tel: 0870 010 8707. www.tjm.org.uk
- Womankind Worldwide - 32- 37 Cowper Street, London, EC2A 4AW.
Tel: 020 7549 5700. www.womankind.org.uk
- Christian Aid - 35 Lower Marsh, Waterloo, London, SE1 7RL.
Tel: 0207 6204444. www.christianaid.org.uk
Amnesty International - 99 Rosebery Avenue, London, EC1R 4RE.
Tel: 020 7814 6200. www.amnesty.org.uk
- Liberty - 21 Tabard Street, London, SE1 14LA. Tel: 020 740 3888.
Briefing funded by the Norfolk Independent Waste Trust and Cobb Charity
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