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Economics for the Earth

Book review

Eco-economy: Building an Economy for the Earth, by Lester R Brown, W W Norton

Human well-being and the natural environment, by Partha Dasgupta, OUP

The shortcomings of market economics are now so obvious that it seems almost unkind to draw attention to them. The trouble is that they remain the engine in the juggernaut of the conventional wisdom which rolls relentlessly on, taking most governments, industry, business, and some universities and much of the public with them. As Michael Prowse recently pointed out in the FT (26/27 January), they amount almost to a religion with its own theology about how society should work. The fact that they are often misleading and potentially disastrous is at last beginning to emerge; and in their very different ways the two books under review amply demonstrate it.

As President of the World Watch Institute and now of the Earth Policy Institute, Lester Brown has a quarter century of campaigning behind him for bringing the environmental, and more particularly the ecological dimension into economics. Year by year his State of the World reports have recorded the growing impact of human activities on the planet and its life system. This impact is mostly new, or at least has only recently become manifest. It relates to the extraordinary increase in human numbers, the movement of people from the countryside to those vulnerable organisms towns, damage to soils and accumulation of wastes, pollution of water and shortages of supply, the diminution of other species, from animals and fish to forests, plants and micro-organisms, and the effects of human-induced changes in atmospheric chemistry, including ozone depletion, new patterns of temperature and rainfall and sea level rise.

Yet most of this scarcely figures in conventional economic analysis, and the costs go virtually unmeasured. There is kind of cosy belief that the Earth's resources are unlimited, that substitutes can always be found, that technology can fix whatever problem may arise, that economic growth can be indefinitely sustained, and that in the end humans world wide can evolve from "developing" to "developed" status (whatever those labels can be held to mean). Brown aptly quotes Oystein Dahle, the retired Vice President of Esso for Norway and the North Sea: "Socialism collapsed because it did not allow prices to tell the economic truth. Capitalism may collapse because it does not allow prices to tell the ecological truth."

The way in which we determine the true costs of goods and services is at the heart of the problem. Tim Wirth once said that the "economy is a wholly owned subsidiary of the environment". Few would think so from the way in which we treat - and value - the environment. In going through the abuses we inflict on it every day, Brown first induces a sense of helplessness and despair. The problems seem so enormous that they are out of human reach. But he goes on to outline what should be done about them in the form of the creation of what he calls a new or eco-economy.

Such an economy may look like a distant city on a hill. As usual the difficulty is how to get from here to there. This is the stuff of politics and philosophy as well as economics: the means of doing so, most of them familiar, rest mainly with governments, provided they can get sufficient public support. They include a switch to renewable sources of energy, reform of the tax system with redistribution of subsidies, redesign of cities and transport policies, a new materials policy with emphasis on recycling and disposal of waste, and new arrangements covering agriculture, conservation and respect for those other species with which we share the Earth, and on which we utterly depend. He believes that if we do not begin the process soon, the results will be dire; and the longer we delay the more dire they will be.

Most of this may look persuasive on paper, but even those who agree in principle have difficulty with the intellectual underpinning. How can we move from current modes of thought and behaviour to something radically different in so many ways? This is where Partha Dasgupta comes in. His description of the state of the environment is very similar to Brown's even if more cautiously expressed. Starting from definitions of human wellbeing (to include such factors as private consumption, life expectancy at birth, literacy, political liberties and civil liberties), he shows the extent to which current theory and methodology are failing us. Many of the measuring devices in constant use, from GMP/GDP to the well meaning but inadequate Human Development Index, tell partial and misleading stories, and lead to perverse results. Again determination of true cost is critical. If for example we take depreciation of human and natural capital into account, the Indian sub-continent and sub-Saharan Africa, two of the poorest parts of the world with a third of the world's population, have become poorer over the last thirty years, and some countries in the region a good deal poorer.

This leads Dasgupta into an elaborate redefinition of terms with new tools of measurement, accompanied, for the mathematically inclined, by some daunting algebra. It contrasts sharply with the conventional literature on development issues, and should now be necessary reading for those involved in them.

Lester Brown writes for the general public, and Partha Dasgupta for professional economists. For that reason the general reader may find Dasgupta unduly complicated and in some respects too defensive. He could have put his case more simply and effectively without worrying overmuch about what has been said in the past, and the likely criticisms of his peers, whether philosophers or economists, nurtured on this or that school of thought.

The message from both books is clear: we need to think again about the human impact on the Earth, and we need to do so now. The implications reach into every aspect of our lives.

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