The economics of sustainability - part one | PDD

The economics of sustainability – part one


on February 12 2014

 In this post, I’ll concentrate on the economic case for fulfilling a full-scale migration toward environmental sustainability, through design, in addition to the wider global economy. So, are we moving toward a greening of capitalism?

For a species aged over 200,000 years, our evolutionary expansion over the last 200 has been incredible. We have moved from being largely agriculturally-dependent economically to industrious, innovative and most importantly, consumerist. The fuel for our broad transcendence into economic prosperity has of course been the commitment to free trade, open markets and an abundance of choice, which has largely moulded a capitalist economic model wholly dedicated to the assimilation of developed (and now developing) markets. So what has this given us? Well in a financial sense; a border-less world. A consumer in London can purchase clothes made in China, a strawberry farmer in Spain can sell his produce to a family in the United States, and a multinational company can seemingly live in complete tax seclusion.

The 2013 G20 Summit in Moscow. The group has been dedicated to developing free market reforms in emerging economies in a bid to further global economic integration. Image by Forex4you. Featured image by Singaporean in London @flickr.

Capitalism has given us a right to life, through the right to earn – however much our intellect and skills allow us.

So what happened 5 years ago? The collapse of the international banking system swept away tens of trillions of dollars of wealth from citizens of all nationalities. Millions lost jobs, savings, homes and credit worthiness through a direct consequence of a failure to regulate and sustain. Current economic growth is directly linked to the exploitation of natural resources and increasing consumer demand – which limits the terms of fiscal expansion to the level of resources that can be exploited, and therefore the amount of goods consumers can buy.

Our world simply cannot sustain this. Such as we as a species have evolved to condition ourselves to new circumstance, so too must our economic thinking be coerced into forward guidance for the planet; sustainability allows for the conjugality of capitalist economic expansion and renewable-resource exploitation through a stable, long term context.

You may have heard of the term ‘Green Capitalism’, a theory which envisages the levers of our existing economic infrastructure being manoeuvred to reverse environmental decline. In the book ‘Green Capitalism’ by James Heartfield the notion of this facilitated mutual evolution of economic policy, alongside the environment, aims to highlight the limitations of existing fiscal and monetary infrastructure and regulation. David Cameron’s vision of a Green Investment Bank may have come to fruition but it’s principles are highly constrained by the real-world context of its lending capabilities – small businesses are offered anaemic one-off subsidies to invest in green technology with no formal outline of sustainable business management. Existing economic policy in the UK is thoroughly inclined against ‘environmental expansion’, in which businesses and individuals are educated and economically encouraged to create and sustain positive-environmental actions – either through business or personal choices.

So one can presume this; if the ideals of capitalism is the pursuit of profit, and to develop the largest possible profit margin per unit of service (be it tangible or not), businesses and individuals cannot grow beyond the supply of their practices. The earth as an entity is finite, there may be a vast scale of resources available to exploit now, but there is a definitive asterisk attached to every square-inch of material extracted: (*) that there is now one less square-inch to extract. In economics, this process is called capital reserve deficit, whereby financing expansion is done through reserves or pre-acquired finances such as profits which are simply not large enough to fund it.

The City’s exposure to and subsequent collapse from the American subprime mortgage crisis of 2008 was in direct consequence of a form of capital reserve deficit. Image by invisiblelllf @instagram.

Let’s think about this from a more understandable perspective; as an individual you will have three main financial mechanisms in your life – your income, your expenses and your savings. If you were to operate your finances like society it would be as follows; you would use your savings (non-renewable resources e.g. fossil fuels/heavy metals) to finance your expenditure (energy/materials used), whilst your income (renewable-resources e.g. solar/wood), would be a means of financing your savings. But because your savings will eventually run out, you’ll only have your small income to survive on and pay your expenditures. So what do you do? Cut your expenses? No, this is what some ‘Greens’ suggest doing but it completely goes against every economic theory – the idea of continual growth.

And so we arrive at the dilemma of capitalism; without resource exploitation there can be no growth because society cannot spend on new goods and services. Growth has been so conceptualised with dipping into our ‘savings’ that there has never really been a need or focus to build up our ‘income’. The more we dip into the pockets of our children the more in debt we become to the environment, with no ‘bail-out’ mechanism in place if the environmental shit does end up hitting the fan.

In Part II I’ll be discussing how we can overcome this impasse through sensible economic policy that aims to support the development of the environment, and how this relates to the creative industry.