25 August 2010

Modernising Henry George

Herman Daly, Professor of Ecological Economics, School of Public Policy, University of Maryland, says nineteenth century economist Henry George has much to teach us about how to share the value of common natural resources...

Reposted in full from the new economics foundation, 19 July 2010

'Economists have traditionally considered nature to be infinite relative to the economy, and therefore not scarce, and therefore properly priced at zero. But the biosphere is now scarce, and becoming more so every day as a result of growth of its large and dependent subsystem, the macro-economy.

As the macro-economy expands into the ecosystem it displaces what was there before, namely habitat of other species (and of indigenous and poor members of our own species). Consequently, biodiversity decline is a salient index of the increasing scarcity of nature, as is involuntary resettlement of people to make way for dams, mines, soybeans, and cattle; and of course increasing depletion and pollution.

Sacrifice of nature’s scarce services constitutes an increasing opportunity cost of growth, and that in turn means that nature must be priced, either explicitly or implicitly. But to whom should this price be paid? Nature would prefer not to sell herself, but if forced to it by growth, would at least like to divide equally among her children the revenue from the forced sale of her previous gifts.

From the point of view of efficiency it does not matter who receives the price, as long as it is counted and paid by the users. But from the point of view of equity it matters a great deal who receives the price for nature’s increasingly scarce services. Such payment is the ideal source of funds with which to finance public goods, and to redistribute to the poor.

“Value added” belongs to whoever added it. But the original value of that to which further value is added by labor and capital, the value of scarce natural resources and natural services, should belong to everyone. It is the original commonwealth. These “payments to nature” should be the focus of redistributive efforts. Payment for what is now too scarce to be treated as a free gift is measured and appropriated by markets as a rent (payment in excess of necessary supply price). Rent is unearned income to the recipient, but allocative efficiency requires that it be paid by the user of the resource. Taxation of value added by labor and capital is certainly legitimate. But it is both more legitimate and less necessary after we have, as much as possible, captured natural resource rents for public revenue.

The above seems to be the basic insight of early American economist Henry George (1839-1897) who applied it specifically to rent on the scarcity of desirable locations of land rather than to rents on natural resource scarcity in general. Could we not extend Henry George’s logic to resources in general? For resources the necessary supply price is the cost of extraction — so any payment above cost of extraction is rent. Since land has no cost of extraction all payment for land is rent. If no rent is paid, land does not cease to exist. Neoclassical economists accept this definition of rent but resist Henry George’s ethical emphasis on rent as unearned income.

The modern form of the Georgist insight is to tax the rent from land, and by extension from natural resources and services of nature, and to use these funds for fighting poverty and for financing public goods. Or we could simply create a trust fund from these rents, and disburse the earnings from it to all citizens, as in the Alaska Permanent Fund.

Our present practice of taxing away a lot of the value added by individuals from applying their own labor and capital creates resentment, and discourages the supply of labor and capital.

Taxing away value that no one added, scarcity rents on nature’s contribution, does not create as much resentment, and the resentment it does cause is less justified. In fact, failing to tax away the scarcity rents to nature and letting them accrue as unearned income to a landlord class has long been a primary source of resentment and social conflict. Furthermore, taxing land and resource rent does not diminish their quantity. Soviet communists tried for a while to abolish the category of rent because it represented unearned income — a part of “surplus value” like profit and interest. They jumped to the conclusion that therefore resources and land must be free. But that makes it impossible to allocate resources efficiently. Better to follow Henry George and retain rent as a necessary price for measuring opportunity cost, but to then tax it away as unearned income to the landlords. The more we tax away rent the less we have to tax the value added by human labor and capital.

Charging scarcity rents on natural resources and redistributing them to the commonwealth can be effected either by ecological tax reform, or by quantitative cap-auction-trade systems. In differing ways each would limit expansion of the scale of the economy into the biosphere, thereby preserving biodiversity and also providing revenue to run the commonwealth. I will not discuss their relative merits here, but rather emphasize the advantage that both have over the currently favored strategy. The currently favored strategy might be called “efficiency first” in distinction to the “frugality first” principle embodied in each of the policies mentioned above.

“Efficiency first” sounds good, especially when referred to as “win-win” strategies, or more picturesquely as “picking the low-hanging fruit.” But the problem of “efficiency first” is with what comes second. An improvement in efficiency by itself is equivalent to having an increased supply of the resource whose efficiency increased. The price of that resource will decline. More uses for the now cheaper resource will be made. We will end up consuming perhaps as much or more of the resource than before, albeit more efficiently, as pointed out in the nineteenth century words of economist William Stanley Jevons:

“It is wholly a confusion of ideas to suppose that the economical [efficient] use of fuel is equivalent to a diminished consumption. The very contrary is the truth.” (The Coal Question, 1866, p. 123)

We need frugality (diminished consumption) more than efficiency. “Frugality first” induces efficiency as a secondary consequence, an adaptation; efficiency first does not induce frugality — it makes frugality less necessary, and it does not give rise to a scarcity rent that can be redistributed. Let us put frugality first by reducing physical throughput with ecological tax reform and/or cap-auction-trade systems for basic resources, and by so doing both avoid the Jevons effect and collect the scarcity rents on nature for the commonwealth rather than the elite.

If we could directly limit population and per capita resource use (scale of the macro-economy) to a level that nature could easily sustain, then nature’s services could remain free. But if we insist that population and per capita consumption must be free to grow, then the rising cost of natural resources must indirectly limit growth, and the question of who receives the increasing rent (who owns nature) will become ever more pressing, and Henry George’s thinking ever more relevant. Alternatively, our increasing takeover of nature will, beyond some point, render moot the question of distribution of rents by eliminating all potential claimants! When an overloaded ship sinks all aboard drown — even if the overload is justly distributed and efficiently allocated!'

Calling All Future-Eaters

Confronting piece by Pulitzer Prizewinning journalist Chris Hedges...

Reposted in full from TruthDig, 19 July 2010

'The human species during its brief time on Earth has exhibited a remarkable capacity to kill itself off. The Cro-Magnons dispatched the gentler Neanderthals. The conquistadors, with the help of smallpox, decimated the native populations in the Americas. Modern industrial warfare in the 20th century took at least 100 million lives, most of them civilians. And now we sit passive and dumb as corporations and the leaders of industrialized nations ensure that climate change will accelerate to levels that could mean the extinction of our species. Homo sapiens, as the biologist Tim Flannery points out, are the “future-eaters.”

In the past when civilizations went belly up through greed, mismanagement and the exhaustion of natural resources, human beings migrated somewhere else to pillage anew. But this time the game is over. There is nowhere else to go. The industrialized nations spent the last century seizing half the planet and dominating most of the other half. We giddily exhausted our natural capital, especially fossil fuel, to engage in an orgy of consumption and waste that poisoned the Earth and attacked the ecosystem on which human life depends. It was quite a party if you were a member of the industrialized elite. But it was pretty stupid.

Collapse this time around will be global. We will disintegrate together. And there is no way out. The 10,000-year experiment of settled life is about to come to a crashing halt. And humankind, which thought it was given dominion over the Earth and all living things, will be taught a painful lesson in the necessity of balance, restraint and humility. There is no human monument or city ruin that is more than 5,000 years old. Civilization, Ronald Wright notes in “A Short History of Progress,” “occupies a mere 0.2 percent of the two and a half million years since our first ancestor sharpened a stone.” Bye-bye, Paris. Bye-bye, New York. Bye-bye, Tokyo. Welcome to the new experience of human existence, in which rooting around for grubs on islands in northern latitudes is the prerequisite for survival.

We view ourselves as rational creatures. But is it rational to wait like sheep in a pen as oil and natural gas companies, coal companies, chemical industries, plastics manufacturers, the automotive industry, arms manufacturers and the leaders of the industrial world, as they did in Copenhagen, take us to mass extinction? It is too late to prevent profound climate change. But why add fuel to the fire? Why allow our ruling elite, driven by the lust for profits, to accelerate the death spiral? Why continue to obey the laws and dictates of our executioners?

The news is grim. The accelerating disintegration of Arctic Sea ice means that summer ice will probably disappear within the next decade. The open water will absorb more solar radiation, significantly increasing the rate of global warming. The Siberian permafrost will disappear, sending up plumes of methane gas from underground. The Greenland ice sheet and the Himalayan-Tibetan glaciers will melt. Jay Zwally, a NASA climate scientist, declared in December 2007: “The Arctic is often cited as the canary in the coal mine for climate warming. Now, as a sign of climate warming, the canary has died. It is time to start getting out of the coal mines.”

But reality is rarely an impediment to human folly. The world’s greenhouse gases have continued to grow since Zwally’s statement. Global emissions of carbon dioxide (CO2) from burning fossil fuels since 2000 have increased by 3 per cent a year. At that rate annual emissions will double every 25 years. James Hansen, the head of NASA’s Goddard Institute for Space Studies and one of the world’s foremost climate experts, has warned that if we keep warming the planet it will be “a recipe for global disaster.” The safe level of CO2 in the atmosphere, Hansen estimates, is no more than 350 parts per million (ppm). The current level of CO2 is 385 ppm and climbing. This already guarantees terrible consequences even if we act immediately to cut carbon emissions.

The natural carbon cycle for 3 million years has ensured that the atmosphere contained less than 300 ppm of CO2, which sustained the wide variety of life on the planet. The idea now championed by our corporate elite, at least those in contact with the reality of global warming, is that we will intentionally overshoot 350 ppm and then return to a safer climate through rapid and dramatic emission cuts. This, of course, is a theory designed to absolve the elite from doing anything now. But as Clive Hamilton in his book “Requiem for a Species: Why We Resist the Truth About Climate Change” writes, even “if carbon dioxide concentrations reach 550 ppm, after which emissions fell to zero, the global temperatures would continue to rise for at least another century.”

Copenhagen was perhaps the last chance to save ourselves. Barack Obama and the other leaders of the industrialized nations blew it. Radical climate change is certain. It is only a question now of how bad it will become. The engines of climate change will, climate scientists have warned, soon create a domino effect that could thrust the Earth into a chaotic state for thousands of years before it regains equilibrium. “Whether human beings would still be a force on the planet, or even survive, is a moot point,” Hamilton writes. “One thing is certain: there will be far fewer of us.”

We have fallen prey to the illusion that we can modify and control our environment, that human ingenuity ensures the inevitability of human progress and that our secular god of science will save us. The “intoxicating belief that we can conquer all has come up against a greater force, the Earth itself,” Hamilton writes. “The prospect of runaway climate change challenges our technological hubris, our Enlightenment faith in reason and the whole modernist project. The Earth may soon demonstrate that, ultimately, it cannot be tamed and that the human urge to master nature has only roused a slumbering beast.”

We face a terrible political truth. Those who hold power will not act with the urgency required to protect human life and the ecosystem. Decisions about the fate of the planet and human civilization are in the hands of moral and intellectual trolls such as BP’s Tony Hayward. These political and corporate masters are driven by a craven desire to accumulate wealth at the expense of human life. They do this in the Gulf of Mexico. They do this in the southern Chinese province of Guangdong, where the export-oriented industry is booming. China’s transformation into totalitarian capitalism, done so world markets can be flooded with cheap consumer goods, is contributing to a dramatic rise in carbon dioxide emissions, which in China are expected to more than double by 2030, from a little over 5 billion metric tons to just under 12 billion.

This degradation of the planet by corporations is accompanied by a degradation of human beings. In the factories in Guangdong we see the face of our adversaries. The sociologist Ching Kwan Lee found “satanic mills” in China’s industrial southeast that run “at such a nerve-racking pace that worker’s physical limits and bodily strength are put to the test on a daily basis.” Some employees put in workdays of 14 to 16 hours with no rest day during the month until payday. In these factories it is normal for an employee to work 400 hours or more a month, especially those in the garment industry. Most workers, Lee found, endure unpaid wages, illegal deductions and substandard wage rates. They are often physically abused at work and do not receive compensation if they are injured on the job. Every year a dozen or more workers die from overwork in the city of Shenzhen alone. In Lee’s words, the working conditions “go beyond the Marxist notions of exploitation and alienation.” A survey published in 2003 by the official China News Agency, cited in Lee’s book “Against the Law: Labor Protests in China’s Rustbelt and Sunbelt,” found that three in four migrant workers had trouble collecting their pay. Each year scores of workers threaten to commit suicide, Lee writes, by jumping off high-rises or setting themselves on fire over unpaid wages. “If getting paid for one’s labor is a fundamental feature of capitalist employment relations, strictly speaking many Chinese workers are not yet laborers,” Lee writes.

The leaders of these corporations now determine our fate. They are not endowed with human decency or compassion. Yet their lobbyists make the laws. Their public relations firms craft the propaganda and trivia pumped out through systems of mass communication. Their money determines elections. Their greed turns workers into global serfs and our planet into a wasteland.

As climate change advances, we will face a choice between obeying the rules put in place by corporations or rebellion. Those who work human beings to death in overcrowded factories in China and turn the Gulf of Mexico into a dead zone are the enemy. They serve systems of death. They cannot be reformed or trusted.

The climate crisis is a political crisis. We will either defy the corporate elite, which will mean civil disobedience, a rejection of traditional politics for a new radicalism and the systematic breaking of laws, or see ourselves consumed. Time is not on our side. The longer we wait, the more assured our destruction becomes. The future, if we remain passive, will be wrested from us by events. Our moral obligation is not to structures of power, but life.'

Chris Hedges '...spent nearly two decades as a foreign correspondent in Central America, the Middle East, Africa and the Balkans. He has reported from more than 50 countries and has worked for The Christian Science Monitor, National Public Radio, The Dallas Morning News and The New York Times, for which he was a foreign correspondent for 15 years. Hedges was part of the team of reporters at The New York Times awarded a Pulitzer Prize in 2002 for the paper’s coverage of global terrorism.'

Cup of Cold Undies?

...surely one of the more ridiculous examples of unnecessary consumption and packaging!

Sourced from Business Unusual, 23 August 2010

'In reaction to one of the longest heat waves in Japan’s history stores everywhere have been stocking ice cold panties in disposable cups.

Is this some fetish or just a gimmick…how much relief can one get from cold panties?

I wonder, do stores provide a booth to put on your newly purchased, cold panties?

What about ice padded bras? Or ice packed boxers?'

Chinese Traffic Jam Extends 60 Miles and Nine Days

Excerpt from The Australian, 25 August 2010

'China's hellish 10-day-old traffic jam now stretches 100km and could last another three weeks.

Triggered by road construction, the snarl-up reaches almost to the outskirts of Beijing, traffic still creeps along in fits and starts and villages along the route are making a killing providing supplies for stranded drivers.

It's a metaphor for a nation that sometimes chokes on its own breakneck growth.

In the worst-hit stretches of the road in northern China, drivers pass the time sitting in the shade of their immobilised trucks, playing cards, sleeping on the asphalt or bargaining with price-gouging food vendors. Many of the trucks that carry fruit and vegetables are unrefrigerated and the cargoes are assumed to be rotting.

On Sunday, the eighth day of the near-standstill, trucks moved just a kilometre on the worst section, said Zhang Minghai, a traffic director in Zhangjiakou, a city about 150km northwest of Beijing.

China Central Television reported that some vehicles had been stuck for five days.

No portable toilets were set up along the highway, leaving only two apparent options - hike to a service area or into the fields...

The traffic jam built up on the Beijing-Tibet highway, on a section that links the capital to the Chinese region of Inner Mongolia. The main reason traffic has increased on this partially four-lane highway is the opening of coal mines in the northwest, vital for the booming economy that this month surpassed Japan's in size and is now second only to the US...

The car invasion is widely felt. Guo Jifu, head of the Beijing Transportation Research Centre, told a symposium on Monday that vehicles on Beijing's roads multiplied by 1900 per day on average in the first half of this year.

The immediate cause of the traffic jam that began August 14 is construction on one of three southbound highways feeding into Beijing.'

Stop Wasting Food, Save The World's Energy

Excerpt from the
New Scientist, 18 August 2010

'...we could save an enormous amount of energy by tackling the huge problem of food waste. Doing so is likely to be quicker than many of the other options on the table, while also saving money and reducing emissions.

The energy footprint of food is enormous. Consider the US, where just 5 per cent of the global population consumes one-fifth of the world's energy. Around 15 per cent of the energy used in the US is swallowed up by food production and distribution. Most of that comes from farming with mechanised equipment, fertilisers and pesticides, irrigation and so on. Then there's the energy cost of sorting, processing and packaging.

On top of that, each item of food on an American plate has made an average trip of over 2400 kilometres by boat, plane, train or automobile. Then there's unloading, stocking grocery stores and meal preparation. By the time all of these steps are accounted for, food takes a significant bite out of the US's total annual energy budget of about 100 million terajoules.

We have to eat, of course, but what about the food that we produce but do not eat?

Between one-quarter and one-third of the food produced in the US gets wasted, for a variety of reasons. A great deal spoils or is discarded before even reaching consumers, on farms, in fisheries and during processing. Buyers often reject perfectly edible produce because of minor blemishes. Food gets tossed in the trash in the home just because we bought or served too much, or let food spoil. Over a year, the average American family of four spends almost $600 on food that they do not eat.

Between one-quarter and one-third of all the food produced in the US gets wasted Whatever the reason, food waste has a large cumulative impact. A recent analysis by one of us (Michael Webber) and Amanda Cuéllar at the University of Texas at Austin found that close to 2.2 million terajoules embedded in food waste was discarded in the US in 2007 - the energy equivalent of about 350 million barrels of oil (Environmental Science & Technology, DOI: 10.1021/es100310d).

This means that at least 2 per cent of the total US energy budget is literally thrown in the trash. For comparison, 350 million barrels of oil is nearly double Switzerland's total annual energy consumption. Only a small fraction of what is wasted is ever recovered.

Global energy consumption is projected to increase by close to 50 per cent between 2006 and 2030. That makes reducing our dependency on fossil fuels even more challenging.

Tackling food waste should be added to the toolbox of policy options because its relative impact is on the same scale as more popular measures such as biofuel production and offshore drilling...'