Down to earth economics
A look at green economic alternatives.
It is hard to imagine that a high-consuming, long-hours, work-oriented society such as Britain could ever move to an ecologically sustainable and egalitarian economic form. Yet there are clear challenges to ‘there is no alternative’ thinking. Not the least of these is the looming ecological limit to the human processes of production and consumption currently exhibited by the richer countries – and implicitly or explicitly promised to the rest of the world. Global warming in particular has stirred global political interest, in a way that the earlier 1970s ‘Limits to Growth’ debate did not. Resource wars are already happening, and the industrial growth of India and China will in the near future remove from the situation the relatively easy access to world resources that older industrial societies like Britain have hitherto enjoyed. A dramatic shift in the value of the pound, a retrenchment in China to meet the needs of its internal economy, or a collapse in the knowledge economy or financial services sector - all these would leave Britain very exposed. Rather ironically, it is this unbalanced nature of the British economy that has allowed it to appear to meet its Kyoto targets, by shifting the ecological costs of manufacturing on to other countries.
Neo-classical economics – the economic ideology posing as a ‘natural law’ that has underpinned global capitalism – is also under challenge. Despite claiming that it theorises the efficient distribution of goods and services under conditions of scarcity, conventional economics seems markedly ill-equipped to respond to real limits in a capitalist market economy driven by wasteful competition. It has no answer to the demands for continual output, and constant pressure to consume, that arise from the drive for profit. As Marx pointed out, capitalist production is for profitable exchange, not utility. And since neo-classical economics makes no distinction between needs and wants, it has no way of prioritising the activities of the economy other than profitability. And furthermore, since people need money in order to meet their needs, most people have little choice about how they structure their working lives. Those who cannot get on the treadmill suffer poverty and the coyly named ‘social exclusion’. Even those who are judged successful are often frustrated and frazzled. More wealth (above a comfortable minimum) does not necessarily bring more happiness, and many people experience problems of work/life balance. For all these reasons people are looking for better forms of economic analysis.Green and socialist economy would need to be able to provide for people’s needs on an egalitarian basis without demanding perpetual growth. For all but the most optimistic assumptions about resource availability, a radical solution must mean that high-consuming economies are going to have to cut back hard, particularly if those who have had little benefit from the world’s resources are going to get a share. Socialists have tended to back off from the dilemma of needing to ‘level down’, leaving greens to campaign on such seemingly unpromising ground. However, a recognition of ecological limits can strengthen the socialist critique of capitalism: it makes private ownership and control of the resources that are necessary for human well-being much more difficult to justify, and brings to the fore questions of socio-economic justice and the responsible use of resources. Equally, green economics without a socialist analysis has no argument to offer against the idea that the rich should be left to ‘manage’ the environment – the kind of thinking that in the UK makes common cause between aristocrats and greens. Charles may go organic, but he is unlikely to renounce his privilege or turn over his lands to the poor. On the other hand, if socialists do not take ecological issues seriously, they will be trapped within a productivist framework of business as usual. Socialised command economies have historically been as ecologically destructive as market systems. There is therefore a clear need for an approach to economics that combines both socialist and green insights. But before considering what some of the elements of this might be, it is useful to analyse why it is that economies became so destructive in the first place, and here insights from feminist economists are also of great value.
Re-embodying the economy
Ecofeminist political economists argue that modern economies are so destructive because they have lost touch with the overall reality of human existence in nature. The arguments of greens and feminists are brought together to connect the exploitation and degradation of the natural world and the subordination and oppression of women. As well as sharing feminist concern about inequality between men and women within economic systems, ecofeminists see economies as being fundamentally gendered in the way that they externalise the life of the body, together with the rest of nature. Work around the life of the body has largely been seen as women’s work – though it is not necessarily done by women, nor by all women. As a result of this gendered division of labour, activities that represent only a very partial aspect of human existence have become the driving force and focus of modern economies. Gendered economics is represented in the abstraction ‘economic man’.
‘Economic man’ is not just a theoretical construct; ‘he’ is also a living being (man or woman), whose working day and working life ignores the wider framework of bodily existence. The connection between the gendered nature of the economy and its ecological destructiveness is that its externalisation of the life of the body from the formal economy makes it possible also to ignore the frailty and vulnerability of human existence in relation to the environment. ‘Economic man’ can bound across the planet, ignoring spatial and temporal boundaries. Consumption is not related to seasons or to location. Waste is dumped out of sight. It disappears into the background of life, like dirty clothes left on the bathroom floor. This abstracted economy has been able to disembody itself because it is generally people outside the economy – mainly women or low paid workers – who have undertaken the bodywork of daily replenishment, the bearing and raising of children, and caring for the sick and the elderly. Much of this work is now carried out in addition to employment in the formal economy. In cases where employers have provided for bodywork activities, it has usually been because of the need to retain an essential workforce (for example, workplace nurseries) or as a result of campaigns by trade unions (for example, pension and other benefits). But, in the name of market imperatives, companies are increasingly attempting to offload such responsibilities where they have them. The most recent example of this is the move towards shedding responsibility for pensions for retired workers. The market economy has tended to see care of the human body as a social or public service, and not as a responsibility of the employer who uses that body for profit. Furthermore, the taxes that pay for welfare and health services are declared to be a ‘drain’ on the ‘wealth-creating’ sector.
Feminist thinkers have tried to overcome the abstraction of the male-dominated market economy in various ways. One has been to call for bodywork to be recognised as work, valuing it through payment or other forms of recognition, identifying it as the ‘love economy’ or ‘care economy’. There is a danger in such cosy concepts. Bodywork is not necessarily undertaken in a benign atmosphere. The domestic realm can involve cruelty and oppression, low-paid work or even slavery. And while many women (and it is usually women) may perform domestic work with care and love, this is often entwined with an imposed altruism, where they feel that they have no choice but to do their ‘duty’. Another feminist approach has been to challenge the dominant economic logic of a ‘separative’ economic man driven only by (his) rational choices. Instead the focus is turned to reflecting on what an economy does in its broadest sense. This is embraced in the concept of provisioning, which can encompass human needs, paid and unpaid work and the role of the ecosystem. Provisioning covers the full range of activities, from love and care to food, shelter and social and leisure activities. The concept also opens up the distinction between wants and needs, and helps to focus economic decision-making on the needs of human beings in all aspects of their lives.
A further approach seeks to reduce the importance of the market economy by seeing it as one of several ‘economies’; others would include the public, community/voluntary or social/co-operative. It is certainly the case that many alternative economic forms have been explored, both theoretically and in practice. These range from different forms of economic organisations such as co-operatives, LETS, time banks; various levels or forms of public sector ownership; innovations such as local money; and personal solutions such as voluntary simplicity and various forms of subsistence, self-provisioning or personally directed work (as implied in notions such as self-work, own work or autonomous work). Some of these have been historically very successful, for example the British consumer co-operative movement; although this has, since the mid twentieth century, been battered by commercial competition. However, while these are all interesting initiatives, and point to various ways in which a sustainable economy could be organised, it is not clear that any of them have yet challenged the dominance of the market economy.
Re-embedding the economy
As well as being re-embodied, ecologically sustainable economic activity would need to be ecologically re-embedded. Greens’ ideas of how to achieve this have ranged from a return to subsistence or self-provisioning economies, through local or appropriate scale economies, to market solutions such as trading pollution permits. From a socialist perspective, both market and pre-modern solutions would be unacceptable. The former inasmuch as it retained elements of capitalist organisation, the latter because they are unlikely to be suitable for large-scale populations. Some green solutions at the local level, such as buying plots of land and aiming for self-provisioning, can seem to be a radical solution, but can also be seen as individualised market solutions. Such small communities may also rest upon societal externalities – such as the cultural and educational heritage of their members, national communications and other forms of infrastructure, and services such as hospitals. Like the formal economy, a self-provisioning life may suit healthy adults and their younger children, but it may not be able to cope with old age or infirmity, or even the needs of young adults. From a feminist point of view it is also necessary to maintain some scepticism about the concept of ‘community’ that lies, implicitly or explicitly, behind the notion of the local or the human-scale. Historically, human societies have often been violent, restrictive and hierarchical. Most have shown evidence of male domination and a sexual division of labour, if not outright repression of women. For this reason it is important that any notion of the local has sufficient openness and cosmopolitanism to allow for different life choices and cultural activities within the framework of provisioning networks. This kind of approach is represented in more internationally-focused concepts of economic localism, linked to what Mike Woodin and Caroline Lucas have described as ‘supportive internationalism’ – which is based on co-operation between localised economies in the flow of ideas, technologies, skills and people.1
Green thinking often seems to imply that such communities are located in rural areas, but human populations are now moving rapidly into urban settlements. Cities and urban areas have been accused of lacking connectedness to the environment, and of having destructive ecological footprints. However, a city or urban centre integrated into its rural hinterland could be seen as integrating the flexibility and cultural diversity of the city within a mainly local provisioning system. Convivial and dynamic integrated city/large town/rural regions may also provide a way of attracting populations away from the huge megacities that are emerging across the globe. In Britain this may help solve the problem of the overcrowded South East and the emptying communities of the North. sustainable approach would look for an even spread of population and socioeconomic activity across already developed areas, with no incursion into undeveloped land. The aim would be to create urban areas that are vibrant, economically sustainable, and where possible locally resourced. Push factors for the creation of such cities and towns could include penalties for living in overused areas, the transport of goods, and long-distance commuting. Pull factors could include the creation of more pleasurable places to live through giving priority in local/regional governance to development that is conducive to conviviality, a high quality of life, health and wellbeing, and to economic planning focused on local procurement strategies rather than on attracting footloose commercial development. Democratic involvement with this local economy could be achieved by the representation of local people on the boards of all commercial companies in a given area, or the formation of local stakeholder panels where there are no local boards. All company reports would include social and environmental audits. Where possible, social enterprises, community businesses or co-operatives would be encouraged, possibly linked by a local money system. Local environmental panels would monitor resource availability, and the use and disposal of waste. The aim would be to set up cities and towns that are embedded in their local environment, and accountable to local democratic networks, in a framework that retains urban living but in a sustainable form. However, such solutions would not be possible if the ideological and practical dominance of the global capitalist market economy remained.
Challenging global capitalism
Late twentieth century globalisation has been predominantly a financial phenomenon. There has not been a huge shift in the proportion of actual goods and services traded, although there have been some changes, such as an increase in intra-company shipment for pecuniary advantage. Transnational corporations now source and manufacture in low wage economies (where there is a combination of absolute low wages and unequal currency values), borrow money where it is cheapest and sell where the price is highest. The capacity of governments to tax international corporations, or companies generally, has also become much more difficult. However, globalised production systems are only feasible if transport costs remain relatively cheap. Cheap fuel also drives the increasingly popular global transport of perishable goods and the international leisure industry.
It is well known that 90-95 per cent of trade in money terms is just that, trade in money, money products and money services. One of the most notable aspects of the dominance of finance in contemporary capitalism is that investment has moved from what Marx saw as the traditional capitalist model of money being invested in commodity production to produce increased money value at the point of sale, to money being invested in money itself as a commodity. A recent, and illustrative, example is the hedge fund. Hedge funds do not invest in companies as such, they only gamble on small changes of currencies, shares or goods values. This is a more extreme version of general stock market trading, where only around 5 per cent of trade relates to direct investment. Because such non-investment trading takes up such a large proportion of the market, and in the absence of any other investment possibilities, even insurance companies and similar repositories of pensions and other personal savings are becoming involved in hedge funds, which might be better described as gambling syndicates.
edge funds reveal a particular aspect of capitalist accumulation, the role of credit finance in speculation. Because the profit on these small-scale gambles is so minuscule, it is difficult to generate sufficient income to make a profit for the investors. There is a tendency therefore to ‘leverage up’ investors’ money many times, in order to create enough volume of profit to provide a return to the original investors. Leverage is just a nice word for borrowed money. Long Term Capital Management, when it had to be rescued by the US Federal Reserve in 1998, is said to have had $5Bn in assets and ‘exposure’ of nearly a trillion. Enron failed with $2Bn in assets and debts of $20 billion.
What these examples show is that investors are profiting from borrowed money, and also that this money can ‘vaporise’ (John Ralston Saul’s term) seemingly without any noticeable impact on the global economy: it is as if people are dipping into a magic well. This well is also used by companies involved in mergers and acquisitions, privatisations or management buyouts, a grab of assets that could be described as primitive accumulation. The tool that is being used is the social phenomenon of money creation. In capitalised money systems, money/credit issue is a means by which those who have control over, or access to, the money-creation process can establish ownership and control over the means and direction of production. In a commodified market system, money is the means by which property and value are accumulated. These companies are effectively investing by using one of the capacities the nation could use to support its socially necessary economic activities. Yet at the same time they demand that no intervention in their activities is permissible (other than, of course, to rescue them when it goes wrong). Michael Perelman points to the irony that while ‘the financial system can bail out a Long Term Capital Management for a few billion dollars … nobody knows how to recover depleted energy sources or to rescue devastated environments on a global scale’.2A number of thinkers, particularly linked to the green movement, have seen the issue of money and credit as an important question, and a possible mechanism for socio-economic change. The role of money and credit in capital accumulation is also vital for a socialist analysis.
Democratising the economy
The creation and circulation of money is also an important issue for ecofeminist political economy, as money is the main mechanism that divides the formal economy from unacknowledged and unpaid bodywork. James Robertson (see Soundings 31) has persuasively argued that the money system is a policy instrument that could be amenable to democratic control. It is well known that commercial banks can issue money they do not have; this is how 97 per cent of new money enters the economy. The rest is notes and coin. Bank debt money is effectively created out of nothing. James Tobin has referred to it as ‘fountain pen money’ and John Kenneth Galbraith commented that ‘the process by which banks create money is so simple that the mind is repelled. Where something so important is involved, a deeper mystery seems only decent’.3
Banking theory argues that there is a control on bank issue, through the holding of a reserve, but Steve Keen has argued that in practice such a reserve does not exist.4 A current example of seemingly unlimited credit creation is the massive amount of personal credit card debt that has been pressed upon all in sundry, even the vulnerable. Despite the fact that they are facing increased bad debt, British banks have recently reported record profits. (They are, however, under a good deal of social pressure, as indebtedness is overwhelming many people. In Britain personal debts are over £1 trillion.) There are two major concerns about the current way of issuing money.
First, this money is a national resource and should be used for social purposes, or at least should be subject to democratic control. The second is that the expenditures of this newly issued money determine the priorities of the economy. Addressing both these questions is vital for the creation of a complex but ecologically sustainable and just economy. Economic investors who build up their assets on debt may describe themselves as wealth-creators, but in fact they are more correctly described as, quite literally, money-makers. In the process they may produce valuable, useful and sustainable products, but on the other hand they may not. The most important point is that money issue is an independent dynamic within an economy. It does not just represent economic activity, it creates it. If the power of the capitalist market economy is to be broken, its unchallenged access to new money issue cannot remain. This is not to ignore the many other aspects of capitalism that need to be challenged, but to recognise the political possibilities of a critique of money issue.
Using money for sustainability and equality
One of the first changes that a green and socialist economy could implement is the institution of democratic control over the issue of new money, together with the decision as to whether or not it should be subject to interest, or issued debt free. It may be that the choice made would be to allow new money to be used commercially, but it is highly unlikely that people would vote for a purely speculative use. It may be that a green and socialist society would still retain a commercial market sector, but this would need to be funded by real investment, that is already circulated money, and be subject to strict environmental and employment regulations. Most importantly, people could have a say in the priority for commercial investment, rather than always being at the end-of-pipe as a consumer. There is evidence that people are increasingly looking to socially and environmentally beneficial ways of using their savings, in organisations such as Charity Bank, Triodos bank and the fair trade loan organisation Shared Interest. New issue money could be used to guarantee these investments, or could form additional funds.
Another possibility is to issue new money as Citizen’s Income. This could be a universal income, or it could be used to influence the economy through being issued or enhanced selectively, for example by region. A basic income could be paid to people who live or settle in underpopulated regions, with all other benefits also being treated in the same way. People could then engage in paid or voluntary work as they desired without loss of benefits. New money issue could also be allocated to a local development bank to help establish local production, local food provisioning and local power generation. Such money could also be used for socially necessary expenditure generally. At present, given that money is issued largely into the private sector, it has to be taxed back out again (with difficulty) into public use. Socially issued money could go the other way round, with social use expenditure carried out first, with the commercial sector having to earn the money through socially relevant activities. This would be a complete reversal of the current PFI strategy for public capital projects.
New money issue could also be used to intervene in one of the biggest employment traps in the UK economy, the housing market. Housing debt represents the vast majority of new money issue. The tragedy is that in most cases mortgage debt is being used to re-buy, usually at a higher price, an asset that already exists. As John Ralston Saul argues, house price inflation is one of the main ways in which money is vaporised.5 The opportunity to cut hours overall that could have been created by women’s entry into the broader labour market has largely been absorbed by the hike of mortgages to seven times average wages (i.e. twice the 3.5 ratio of the 1960s and 1970s). Mortgages of 40 years are now beginning to emerge, and even interest-only mortgages are being issued, where the capital might never be repaid. This is much worse than renting, as the debt still remains even after substantial money has been paid over. Alongside mortgage pressure, many young people face debts for education and the need to save for a pension. Ironically, mortgages and pensions contradict each other. Paying a mortgage debt is eased by a modest level of inflation, whereas pension savings are continually undermined by falling money values.
New money issue could be used to link housing and pensions. Existing homeowners could be offered an annuity for life against the value of their homes. So-called equity release schemes, based on this model, already exist, but their value to the purchaser is not always clear. The point about a publicly supported scheme is that the income would be guaranteed from public money issue, rather than being reliant on the continued profitability of a commercial company. As houses became available through such a scheme they could be sold to young people for a pension-mortgage. That is, they would buy the house, live in it until retirement age (or transfer to another one carrying the mortgage with them) and then at retirement take an annuity, the house at the end of their lives reverting to the public agency to be resold. This would combine the best aspects of public sector housing, which protects the tenant to the end of their life, and the freedom of home ownership, particularly flexibility and mobility. People could jointly own a property, but have individual pension-mortgages. Hopefully such a plan, through intervention in the housing market, would be able to bring house prices down, thereby freeing people from unnecessary employment – something that cannot be achieved if the next generation is locked irretrievably into debt. green economy that is socially just would need to be able to provision its people adequately and provide a good quality of life. The modern economy has provided some freedoms, developments and benefits for some people, but socially necessary work has been caught up with the unsustainable activities of the capitalist market. Wants and needs cannot be untangled and people have little choice about engaging in unnecessary employment. Furthermore, profit-based market production and consumption bears little relation to the sustainability of the human body or the natural environment. But the market economy can be challenged, and it is possible to identify pathways to a sustainable economy.
1. Mike Woodin and Caroline Lucas, Green Alternatives to Globalisation, Pluto 2004.
2. Michael Perelman, The Perverse Economy, Palgrave 2003, p93.
3. James Tobin (1963) ‘Commercial Banks and Creators of Money’, in D. Carson (ed), Banking and Monetary Studies, Unwin 1963, p408; John Kenneth Galbraith, Money: Whence it came and Where it went, Penguin 1975.
4. Steve Keen, Debunking Economics: The Naked Emperor of the Social Sciences, Pluto 2001.
5. John Ralston Saul, The Collapse of Globalism, Atlantic Books 2005, p25.
– from Soundings, journal of politics and culture, issue 34, Winter, 2006; www.lwbooks.co.uk)