Earth and the Economy: Compatibility Problems

Some things we can only ignore for so long. Sooner or later they will surface, and the problem of compatibility between our economy and our planet, Earth, have been gradually appearing for more than a few years now but the time has come to ask ourselves some searching questions. Questions such as, how much can we continue to pretend that our economy can grow and prosper by devouring more and more when we already know we are consuming more each year than the Earth is producing.

Think about that for a moment. We already use more resources each year than the Earth produces. Now consider that the vast majority of these resources are used to sustain the standards of living enjoyed in the developed world. If people in countries such as Zambia, Madagascar, India or Ecuador ever wish to attain the same quality of life, then we need to find them another Earth, or four. More than 80% of the world's population currently live in 'less developed' countries. Unless we address the problem of ecological sustainability, poverty and social injustice cannot be tackled.

It is time for an end to the linear model, and the rise to dominance of circular flow. Conventionally capitalism works under a linear model which begins with extracting or harnessing raw materials, processing them, distributing them, consuming them and then finally disposing of them. Like a giant conveyor belt, converting our priceless natural capital into waste and pollution. It is no wonder the countless ecological crises we face, such as the pollution and poisoning of our oceans, rivers, air and our land. We consume what we see and we mount up piles of waste without any concern as to what consequences it will have for us.

Now imagine if things flowed in circles, emulating nature itself, there will be no waste and our use of natural resources is efficient and well within the Earth's physical limits. Imagine an economy based on re-use and recycling, where our products are engineered for durability rather than disposability, and we see the emergence of a service economy where manufacturers and retailers take on stewardship of their end products, taking care of them after they've been used.

We must recognise that an economy built on free market entrepreneurialism and liberalism as presently constituted or envisaged is not truly free unless we realise that the problem of its compatibility with our natural environment is in fact a hindrance and a barrier to prosperity and freedom in the long term. What might in any other circumstances be viewed as 'intervention' in the free market, and here I refer specifically to the wide ranging application of 'eco-taxes' which seek to 'price-in' ecological externalities, should in fact be considered as the liberation of the market from the natural constraints of a finite world.

Therefore eco-taxes can and in fact should be used as an alternative to regulation and coercion in order to achieve an ecologically sustainable society and economy. In particular by levying an eco-tax as and instead of VAT, taxing the highest those products and services which are most destructive, wasteful, polluting, and otherwise environmentally damaging, and leaving those products and services which are environmentally benign free of tax.

An example of the former might be a kilo of potatoes produced in Scotland using conventional intensive farming methods, and transported by air and road to be sold in Madrid would be subject to a high rate of eco-tax; whilst another kilo of potatoes produced in southern Bavaria using organic farming methods and sold loose (without packaging) nearby in Salzburg would be sold with low or even zero eco-tax. It must be noted that eco-taxes would not be levied against the distances goods and services are transported but the method of transport and associated negative environmental impacts such as carbon emissions. Whilst the imposition of such a tax regime may at first seem like a labour intensive and bureaucratic process, in reality this could be countered by simplification of other areas of the tax system and by levying eco-taxes through self-assesment by businesses.

As eco-taxes are raised on negative environmental externalities they should be simultaneously and progressively lowered on personal incomes and business profits so as to ensure that the overall burden of tax remains the same. This is called a green tax-shift. The effect of this regime will be to steer patterns of consumption towards substantially reduced environmental impact and would serve as a crucial and fundamental plank of government policy to achieve a permanently sustainable society, a goal which must be considered an imperative as the sceptre of global warming bears down upon us and we seek the development of a peaceful and stable world where true equality of opportunity and social justice can be attained by people from New York to the Mogadishu because everybody has access to the natural resources needed to enjoy a decent quality of life.