I am fortunate enough to have a pension that will give me something to live on in old age, if I live that long. Like hundreds of millions of people, I also have a bank account which keeps my money safe and pays a little interest, and some insurance which will pay out if something unfortunate happens to me. If I have enough money then, like many people, I might even decide to invest it in some other savings fund to get a bit of extra interest.
Most of this money is invested in stock (equity) markets and bond markets. According to the Office of National Statistics, pensions, insurance and savings accounts for 64% of all UK stock market investment by UK investors. This pattern being repeated around the world effectively cancels out foreign investment, meaning that a very few, commonly used services dominate global finance. If it were not for pensions, savings and insurance then the vast majority of companies would have to be either privately, or co-operatively owned.
As the world economy has moved on from being just a safe place to put money, the primary factor has been the need to grow. Between 1990 and 2006, the Dow Jones Industrial Average, a measure of the average value of key US stocks, grew from 2,800 to 11,300, an increase of over 400%. If this is a reflection of the appetite of the market for growth, then that is a truly ravenous appetite! If the value of investments does not grow according to customer demand then they will cease to be viable; insurance and pension companies will have no basis on which to pay out money, and banks and fund managers will stop paying interest on savings. In the end people will stop investing in any form of market. If growth does not happen then the market economy simply ceases to exist.
The problem is that growth has to come from somewhere, and it can either come from some artificially created value, such as property prices, which could collapse at any time, or some resource, such as oil, coal, cropland, rock or metal, that is continually being used at an increasing rate. In short, if companies do not accelerate their use of resources then the global economy will not be able to carry on as it is. The economy is hell-bent on consuming the Earth's finite resources in order to survive.
But do we have to have an economy that works like that?
There are two ways to look at this : either we try and make the existing system sustainable enough so that the future of the planet is assured, or we change to a system that can assure the future of the planet.
Making The Market Economy Sustainable
In order for the market economy to be made sustainable then natural resources cannot be consumed at a rate greater than the Earth can renew them. In theory, this means only using renewable resources, but in practice it means carefully balancing our needs with what the planet can spare; all with a growing population, each of whom has increasing demands on the Earth's resources.
The market economy as it stands cannot be fundamentally changed in this example. We are told that the system we have is the system that works best. This system has stood the test of time in supporting the various structures that the population depends on, and it is getting more and popular as the burgeoning Indian and Chinese markets can attest to. Market economies create wealth, they ensure free trade can happen, they allow anyone to succeed; so we are told. For the moment, let us just suspend all judgement on what market economies have failed to do for the planet.
Given that we generally have freedom to invest in whatever way we like, then we can, in some small way, change what stocks our money is invested in. For instance, if a large pension fund has a number of members with strong ethical beliefs then certain companies known to be unsustainable may be discarded from the scheme. Many people choose ethical private investments over growth only funds; in fact this accounts for around 10% of all funds in the USA. You may choose, as an individual, to move your savings into a more ethical bank, and your insurance scheme to an insurer who will not invest in highly damaging companies.
The bond market is generally less volatile than the stock market. Bonds are money loans to governments and blue-chip companies, usually for a smaller annual return over a longer period of time. The global bond market is effectively as large as the amount of money that all the governments and large companies in the world wish to borrow. In 2002, according to the IMF, the size of the global bond market was 42.8 trillion US Dollars, even greater than the size of the global equity market at the time. Many pension fund managers and insurers like to use bonds to provide some stability in their investments, and again, it is possible to use your money wisely and refuse to invest in governments and companies (i.e. refuse to prop them up) that have unsustainable practices.
Some companies and governments with poor ethical reputations can be made to suffer, and there can be a feedback effect whereby a withdrawal of investment will weaken the value of this investment overall, thus causing other funds to pull out of "bad" investments. The opposite can be true for positive investment in ethical companies.
All of this looks like good stuff. We can, as individuals, really change the system. But, of course, this is nonsense.
Individuals have very little influence over companies and governments and, in reality, very few people actually care where their money goes. Because the market economy is based on growth, anyone who does not want the value of their money to fall in relation to the world market, and thus not be able to afford what they need, has to invest in a growing market themselves. If the less damaging company or government is not growing much, essentially because they are consuming less resources, then who would want to invest in them? Not the general public, and certainly not the average growth-conscious fund manager.
A recent article in the Financial Times described this problem perfectly. It showed that the growth in markets that are normally considered "unethical" is generally far greater than the growth in conventional markets, and streets ahead of so-called "ethical" funds (which in many cases still allow oil, chemical and mining companies). The concept of sustainable investment is doomed because growth is mandatory in the market, and few people are willing to invest in something that does not grow.
So, if we really want to stop the planet from being eaten up by ravenous growth then the only alternative is to design a system that does not demand ravenous growth in the first place. What about a world where growth ceases to matter, because we are not competing with each other; where we support those who can no longer work; where we have little need for insurance; where we are happy to just put our money away safely because the cost of living will not go up? This can only happen in a world where we are not focussed on growth at all costs at the expense of a comfortable and fair life for everyone.
Changing The System
In order to design an alternative economic system to the market-economy we have now, then all the strictures governing the current economy must be ignored. Why? Because, although in a sense the market-led economy "works", i.e. it supports society, it is also bound to destroy the natural world. As I have said, it is the very nature of the growth-led system that consumes finite natural resources, so any part of that system could potentially be destructive.
I am at an advantage in that I do not have any formal economic training; nor do take much notice of the witterings of career politicians who are dependent on short-term policies for their survival. This means that I have not been conditioned to accept the current economic model as "a good thing". I do, however, understand that humans behave in certain ways and Utopia is really not possible whilst we have a natural desire to covet, compete and copulate at every opportunity. Any new system will have to accept human nature, and also accept that change cannot happen overnight without destroying the harmony that is needed for the new system to exist.
I believe that such a system can be designed. I freely admit that the structure of this growth-free system is not going to just fall into place; it has to be carefully designed and modified over time both to allow people to live healthy and productive lives, and also to ensure that they can live these lives as far into the future as we wish to exist as humans, rather than being destroyed by a world that can no longer support us.
What has to happen is for national economies to contract and converge.
Every single person on the Earth has a right to a basic standard of living; something that hundreds of millions of people in this wonderful market economy still do not have. There also need to exist the social systems required to support large populations; education, healthcare, useful employment, for instance; and, of course, the basic means for survival. It is in the economies that have yet to provide a basic standard of living and these support structures that the new zero-growth economy needs to be set up in first; for it is here that there is least to lose and most to gain, at least in terms of achieving a truly sustainable economy.
It is difficult to imagine how such an economy could survive in isolation or in small groups of countries; but such economies do exist already, in the form of island states, albeit with the inequality that seems to exist wherever humans live together, and which needs to be controlled. It could be said that most developing countries do not have the natural resources with which to support their populations under such a system. In reality, such pronouncements are baffling, as they assume that the countries are aiming to achieve the wasteful "western" standard of living; they assume that such countries cannot form stable governments to manage their social systems; they assume that there is no such thing as renewable energy, highly efficient farming methods, proper systems of material reuse and recycling.
This is not Utopia we are talking about; these are things that have already largely been achieved in the "developed" world, but which people have chosen to ignore in favour of a wasteful way of life.
Over time, all countries will have to converge towards a similar standard of living. This will not happen whilst rich countries have an unequal share of the Earth's resources, and this is where the second, critical part of the change must take place. The disposable mindset must be dismantled - the rich countries must contract. As each country contracts it can then converge with those countries already in the new system.
Contraction means returning to an era of durability, efficiency and only using what we need. There are countless articles and books suggesting how this can be achieved in every aspect of life, and the list is growing longer as more people see what is happening to the world. Of course, there will be huge resistance to this by people and governments who have enjoyed the artificial trapping that wealth can offer; there will have to be a very, very good reason to change. Want a good reason? We are destroying ourselves. Is that a good enough reason?
A world without waste does not have to mean a world with no pleasure and a life of toil, it just means that we have to seek our pleasures not in a way defined by corporations, as we are only to willing to do, but in a way that gives us true contentment. Vanuatu, with few material goods and a simple lifestyle compared to most Westerners, has the most content people on Earth. What do people living in the highly-developed market economy have?
Growth, and discontent - that is all.
Keith Farnish