Economics or Science?

I had an interesting if minorly unpleasant introduction to Davos. Arriving on the World Economic Forum coach from Zurich, we transferred to the shuttle bus to take us to our first engagement as social entrepreneurs with the Schwab Foundation at the Morosani Post hotel. An Australian joined us in the bus. Engaging in conservation she told us she was a journalist from The Australian writing on economics. I complimented her on Australia’s leadership in introducing a carbon price. ‘What, the Suicide Tax!?’ she retorted. The conversation went downhill from there (to what would be a knowing smile from my meditation teacher, I failed to retain a compassionate and calm mind). Anyway, to cut a long story short, I asked something along the lines of, ‘When 99% of scientists agree that man-made climate change is probably the greatest threat to humanity now and in the coming decades, who should we listen to – economists or scientists?’. ‘Economists,’ she said flatly. End of conversation.

When you meet Klaus and Hilde Schwab, you cannot but be won over by their generosity of spirit and that the fact they are, as is the strap line of the World Economic Forum, ‘committed to improving the state of the world’. We had heard Professor Schwab at the World Economic Forum’s Annual Meeting of the New Champions in Dalian last year talk about how we need to measure success not simply in terms of money. Indeed economics has become dominated by money, at least in most people’s minds, rather than its original and broader aim, often described in terms of studying the allocation of scarce resources. Indeed from the planetary perspective, scarce resources – particularly water, food and energy – will increasingly determine geopolitics. So it is useful to return to the roots of economics to really question how we can build the future we want and need to live comfortably on this planet.

Well there is no other forum like the World Economic Forum at Davos in which to ask this question. The two metres of snow which fell here are complemented by a generous sprinkling of Nobel Prize winners, presidents and social entrepreneurs alongside the CEOs of multinationals. When we look at forecasts for population growth, resource availability, resource consumption and time available to us to sort things out there are not very many ways we can make them add up. Planetary boundaries mean that many scientists now give us 20 years or less to get on the right path. The fundamental economics of the planet don’t add up. It is great that many corporations are now integrating sustainability into their businesses, particularly looking at resource-efficiency as a win-win for business and the environment.

Quote of the day goes to Richard Gillies from leading UK retailer M&S PLC whose promotion of clothes recycling through Oxfam high street stores is linked to making new, high quality, cheaper cloth from recycled wool: ‘It is easier to get cashmere from a jumper than from a goat in Mongolia’.
However, resource efficiency is good but is not enough in itself. Resource efficiency drives economic growth which drives increasing consumption which, evidence shows, often drives increasing environmental impact: Money saved from energy efficiency in the home is spent on holidays with budget airlines, increasing rather than reducing CO2 emissions. There is a lot of debate on this derivation of the so-called Jevons Paradox [http://tinyurl.com/mdupo] but it is hard to see resource efficiency being enough in the big picture. We might promote a strategy where resource efficiency is used to drive growth, but we capture that growth as green growth. Possibly. But we might have to take our questioning deeper. Efficiency itself is a sacred cow which needs questioning.

Driving efficiency in one part of a system often decreases performance of the system more widely. We have direct business experience of this through our supply of locally made charcoal and firewood to national retailers in the UK. As retailers increased their efficiency through central ordering and control, so we have experienced that strategy drive increasing disorder in the wider supply chain, unpicking broader system benefits – environmental, social and economic – associated with distributed production and supply. Fortunately today, concepts like Complexity Economics are challenging our focus on efficiency by starting to value other system properties such as resilience. Indeed taking our questioning even further, ultimately I suspect we will come full circle – the only way to improve the state of the world is through deeply and fundamentally embedding values of respect to fellow human beings and the natural world. We need people to be, and feel, part of a global society – a key way to achieve this will be to a create a culture which values more than money, and an economic system which is designed to generate worthwhile employment in green and socially-beneficial products and services – or Right Livelihood – most successfully embodied in the work of World Economic Forum participant and the ‘father of social entrepreneurs’, Professor Muhammad Yunus.

The economic ideologies we are tied to today are no longer helpful in meeting the challenges of this century – not because there is something fundamentally wrong with the study of economics but because economics has been hijacked by money and efficiency.
So let’s not be afraid to question the sacred cows here at Davos and let’s use economics in its widest sense, alongside science, including climate science, which tells us what we need to do.
Editors Note
Pooran Desai, Co-founder, BioRegional and International Director, One Planet Communities, United Kingdom; Social Entrepreneur of the Year, Europe, 2011