2020s >> 2021 >> no-1400-april-2021

Biodiversity loss and the capitalist economy

The Dasgupta review: 600 pages on how capitalism destroys nature, with no mention of capitalism.

In February a 600-page review commissioned by the Treasury titled ‘The Economics of Biodiversity’ was published. The author — Sir Partha Dasgupta, Professor Emeritus of Economics at the University of Cambridge — set out to analyse the effect of the economy on nature, describing how, at current rates of consumption, the loss of biodiversity will soon be too expensive and may likely be catastrophic, and suggested that the way-out of the crisis is to give up GDP as the measure of economic progress.

Global warming enjoys a lot more attention than biodiversity loss but, as beneficial as slashing greenhouse gas emissions is, underestimating the likely impact of biodiversity loss could prove to be a deadly mistake. As the Dasgupta Review points out, many ecosystems, including tropical forests, wetlands and coral reefs, have already been degraded beyond repair, which, according to Dasgupta, ‘could have catastrophic consequences for our economies and wellbeing’.

Humanity’s impact

Humanity’s impact on the natural world is severe: animal populations have dropped by around 70 percent since 1970, and only 4 percent of the world’s mammals are wild; in effect, we are living during the sixth mass extinction of life on the planet. And it is not only about living beings: according to the Review, only in the last two decades, the stock of ‘natural capital’ per person fell by 40 percent. What Dasgupta means by ‘natural capital’ is not only the share of animals and plants per global citizen, but also their share of breathable air, drinkable water and soil in which to grow food; so the rapid reduction of these most basic prerequisites for life is truly alarming. Fringe high-tech solutions or short-term financial fixes that do not tackle this problem head-on would just squander the valuable resources we urgently need for our very survival.

The Review states:

Our economies and well-being depend on our most precious asset: Nature. Our demands far exceed Nature’s capacity to supply us with the goods and services we rely on, so that to keep the present rate of consumption, we would need 2 to 4 Earths by 2050 (depending on the speed of population growth). Once an extinction tipping point is reached, it is exceedingly expensive or impossible to reverse the damage, which fundamentally puts under question the prosperity of future generations.’

So far so good, and these are all valid and important points. But what does the Review say about what lies at the heart of the problem, and how to solve it? According to Dasgupta,

‘the problem is two-fold: the first part is the market failure, as most natural assets are undervalued or even free, and so we do not invest in them; in addition, it is an institutional failure because governments subsidise the destruction of Nature (for example by supporting fossil fuel companies) at the rate of US$4 to 6 trillion per year, while giving only US$68 billion (or about 1 percent of the ‘destruction fund’) for its protection.’

This phrasing of the main problems, however, raises several questions. It assumes that the market is somehow unable to cope with this particular problem, so it needs to be regulated by governments, and that the governments in turn are not doing their jobs well — which is why we have this crisis on our hands. Calling this a market failure means assuming that the market normally takes into account real costs of materials and services. Yet in our globalised economy, where one person’s wages are hundreds of times higher than another’s; where you can get millions for making your computer perform incredibly complex calculations (like bitcoin mining) that help nothing or nobody at all and require enormous amounts of electrical power; where it is cheaper to ship ‘sustainable’ clothes from around the world, only to trash them into ‘recycling’ containers that will be shipped all the way back to never get recycled; where the price of oil went negative last year — in this economy, undervalued assets are not an error or an exception. In fact it is rather a common occurrence that we must acknowledge if we want to understand the forces influencing the current crisis.

Of course, government subsidies to fossil fuels facilitate exploitation of Nature, but Dasgupta fails to see that what drives this exploitation — the motivational principle at the very foundation of the economic system is making a profit. It is simply profitable to exploit Nature, and this is why it is being exploited. Yet somehow professors of economics and company CEOs go out of their way to make up excuses, thinking up complex theories and explanations — all this only to avoid facing up to the truth. As long as we have a monetary, for-profit economic system that makes growth and accumulation of capital the biggest impetus for productive activities, we will continue to be plagued by wastefulness, perverse luxury, inequality, dehumanisation, and yes, rapacious exploitation and loss of the very natural environment that gives us life and nurtures us.

Set up to fail

What should we do then in order to solve this “market and institutional failure”, according to the Review?

Dasgupta notes that ‘the very first step is to understand that our economies are embedded within Nature, not external to it.’ The almost exponential economic growth in the last 100 years, with all the resources it has been devouring, does not seem very likely to be sustainable for much longer, as we would run out of forests to burn and fish to catch. Dasgupta is aware that capitalist theory has been debating a way out of this conundrum by devising various schemes to reroute almost all economic growth from resource-intensive activities such as heavy industry into the virtual and services areas (like software development, entertainment, etc), so that it would get decoupled from resource use, and we would be able to happily continue to invest in the market and make more and more money, ad infinitum.

He takes a bold step in his Review when he explains, with some calculations and copious literature citations, that this is not likely to be possible. Simply put, increased profits inevitably lead to increased spending, and that almost always involves the use of raw materials. Even virtual activities are not ‘free’. For instance, data processing centres require increasingly large amounts of energy (for perspective, Bitcoin has a carbon footprint comparable to that of Argentina), and over 60 percent of the world energy still comes from burning fossil fuels. Dasgupta emphasises that the current path presents extreme risks, and that truly sustainable development would need a ‘different path, where our engagements with Nature are not only sustainable, but also enhance our collective wealth and well-being, and that of our descendants’. He offers three broad recommendations of solutions, not one of which, however, directly addresses the clear logic of capitalist, for-profit destruction of Nature.

Ineffective recommendations

The first recommendation is to reduce demands on Nature by increasing efficiency and utilising so-called ‘quantity restrictions’ rather than pricing mechanisms. In other words, Dasgupta advises against relying on the market, even with the usual interventions of price controls, as it is unlikely to work. What will work now, according to him, is to ban certain practices, for example to fence off more and more natural habitats and prohibit any kind of commercial activity there. While it is encouraging that the Review acknowledges that markets are not the key to solving this problem, government regulation — even though there are several examples of successful species recovery or habitat restoration — will not be able to reverse the effects of the overall economic system that is fundamentally based on the principle of resource consumption and growth. Such restriction measures are akin to attempts to stop the flow of a river with an obstacle — the water (or money) will inexorably find its way around, as we have seen happen time and time again.

The second recommendation is to ‘change our measures of economic success’ from GDP, which does not take into account things you don’t directly use for profit-making, like rare animal species or human happiness, to something Dasgupta calls ‘inclusive wealth’. This new measure of economic success would include natural assets, so if you gain a monetary profit while decreasing the pool of available natural resources, your overall measure of wealth would not grow. This new concept, however, is proposed as a means to improve national accounting systems. What happens when you eat into another country’s natural wealth? It is common practice nowadays that developed countries import raw materials for their technologically sophisticated exports from poorer countries that have little else to offer the globalised market (and trade agreements and IMF loans make sure it stays that way). To really work, this system would have to have all countries in the world agree to it, and so far even a seemingly straightforward worldwide tax agreement that would help alleviate the burden of tax evasion seems beyond reach. Maybe the reason it has been so elusive thus far is this very disconnect between the powers-that-be, on the one hand, demanding a fair distribution of wealth and, on the other hand, actively promoting and rewarding the accumulation of capital.

In his third recommendation, Dasgupta proposes the creation of supranational institutional arrangements to charge for the use of Nature and to then use this money to support these arrangements. He calls on businesses and financial institutions to integrate Nature-related considerations into their strategies. Finally, he suggests that the ultimate responsibility for sustainability lies with us as individuals.

Conclusion

All in all, there are definitely many valuable points in the Review, especially considering that they come from an established economist. At the same time, the proposed conclusions and recommendations show that, functioning for so long within the system, Dasgupta is unable to see beyond its borders, to think outside the box, and so is oblivious to the underlying imperative of capitalist logic that demands profits above all else, and at the expense of everything else, and which is leading us all on the march to devour the planet itself. That would explain why in the 600 pages of the Review the word capitalism is only mentioned once, and even that referred to a description of some academic economics theory that had nothing to do with our current biodiversity crisis or its underlying processes.

In his article ‘The Non-Monetary Economy’ Edgar S. Cahn estimated that, if valued in monetary terms, non-monetary components of the economy, such as household labour and civic activity, would be equivalent to almost 50 percent of GDP (bit.ly/38oxVfY). This shows that, as social and intelligent animals, we are happy to work for what we believe is necessary and will help our loved ones and our communities, even when we are not getting paid.

If we are serious about surviving and leaving our planet to our descendants in a liveable state, without a huge environmental debt impossible to settle, what we really need is not just to abandon GDP as the measure of economic success, but to urgently abandon altogether the monetary, for-profit economy itself and to embrace the socialist system of resource administration as the truly humane, sustainable and fair system of social and economic organisation that respects nature and the scientific principles of its management.

ROY AUSS

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