For the past 30 years and more, perhaps, the neoliberal model of capitalism has ruled supreme, promoting ultimate freedom in markets and the globalisation of finance to apparently deliver endless prosperity to all through consumption-led growth. The result has been massive environmental damage, depletion of natural resources and a growing gap between rich and poor. The model is unravelling, says Chandran Nair, as the hidden costs are surfacing everywhere.
In the West, it started with the financial crisis originating in the US. More recently the debt issues in Greece and other European countries have put paid to the alleged stability of the euro zone. In London, a sense of entitlement and moral decay triggered aimless violence and looting. Asia, often seen as the deus ex machina of the global economy because of its potential markets (mega-consumption), the cost of the boom is most visible in ravaged landscapes, a highly degraded environment, the rapid depletion of resources and the erosion of the most basic of social nets. And Asia has not even started. All of this, if one is honest, has its origins in the almost religious belief in the West that took hold globally in the last three decades: that ultimately free markets, technology, finance and democracy can offer everyone every freedom and solve all the problems of the world. It is time for a hard rethink.
The most obvious lesson from the recent crisis is that today’s version of unfettered capitalism is unable to self-correct. In financial markets, mathematical modelling was found to be so complex during the crisis of 2008 that even financial experts and senior bankers were at a loss when it came to clearing out the rot. The market became difficult to regulate, giving rise to the by now hackneyed expression “too big to fail.” Too few people knew how it worked in the first place. The ones who did know had a vested interest in keeping it going. Unable to come to grips with the entanglements of decades’ worth of financial hanky-panky, and usurped by those vested interests, regulators more or less threw in the towel. The only way to change the course of the dominant economic model at this point is to have an honest debate about capitalism in its current incarnation. It needs to be rid of its excesses and its strengths must be built upon, and Asia is perhaps best placed to lead the way.
To get anywhere, however, Asia will need to reject the growth-at-all-cost model that hinges on encouraging relentless consumption. This growth paradigm, which thrives on under-pricing externalities, was fostered at the time of the Industrial Revolution, and then extended worldwide via colonialism. Then came the mantra of free markets and rejection of any suggestion that growth could reach a limit.
As the conditions for poverty are now better understood, Asian governments are being called upon to wake up and understand that to rely on the market to correct the inefficiencies in the allocation of resources is at best futile and naïve and at worst plain dishonest. The rampant profiteering and volatile nature of financial markets, where decisions taken today can have direct consequences on public policy decisions in the future, means that access to basic rights cannot be left solely to the dictates of the supposed free markets.
Asian governments will also need to reject the notion that wealth will trickle down by some ethereal gravity and that this is the only way to create more equitable and prosperous societies. These objectives should be without question the responsibility of governments and not abdicated to free markets and its agents. If Asian government’s follow this path, then the majority of their populations – which make up the majority of the world’s poor – will suffer dire consequences. To change course they will need to be bold and take on vested interests making this the political challenge of the 21st century.
The consumption-led growth model is well past its sell-by date. In fact, one could go as far as characterising the current challenges facing capitalism as equivalent to the death throes of a sick man: one born in an era of privilege, of abundance, global dominance of a minority and thus accustomed to consuming too much. The tools to correct the inherent market failures need to be redesigned to compute the true cost of resources to produce the goods and services that drive the global economy. Western nations find this transition very difficult and thus hope for some international consensus in the matter, but this is based on rules the developing nations of the world were not the authors of. This is often an attempt to shift responsibility, whilst at the same time looking to and inherently expecting Asian economies to continue to subscribe to and fuel the old model.
The developing world, intellectually subservient for the last few centuries, has sadly sought to ape and emulate this model and thereby unwittingly helped bring the harsh realities of this model to the fore. Asian governments for their part will therefore find it extremely difficult to reshape the expectations of billions who have been told they can have it all, too. But the great opportunity lies in the fact that the majority have not yet been accustomed to even the most basic of consumption needs taken for granted in the West. Thus Asian governments, if they are bold enough, can seize the opportunity to meet the most basic needs of the majority and thereby also ensure their legitimacy whilst reshaping capitalism and maybe even saving the planet.
Eating the planet
Imagine the world by 2050, in which up to five billion Asians are consuming like modern day Americans. As Asia’s global prominence increases, so too will its population’s expectations. The two billion Asians at the margins of the consumption economy will radically transform global demand and supply, not only for non-renewable commodities such as oil and coal (pumping their respective carbon emissions into the atmosphere), but also for renewables such as food (think meat consumption). This is no Malthusian rehash. China is already the world’s largest car market and many hope that India will follow suit. Chinese current car ownership is about 150 per 1000 people and in India it is only about 30 per 1000. This compares with an average of 750 cars per 1000 people in the OECD countries.
Europeans need to embark on an open and radical debate with Asia about the real benefits and pitfalls of the current growth model and how it should be restrained to be sustainable.
To do so would mean to rock the conventional western wisdom of free market liberalism and force public policy makers to question the ultimate objectives of the drivers of economic growth and address an inefficient system of resource allocation, which does not truly reflect the real cost and pricing of externalities. Europe and Asia will need to lead this effort as it is unclear if America’s politics of denial are ready for this shift.
A key issue is to acknowledge that technology cannot be expected to tackle the resource depletion and environmental impacts that growth “for growth’s sake” will have on the planet. This is why Asian government leaders must avoid aping the West and instead redefine the agenda to confront the ultimate challenge of how a global economy for 9 billion people in 2050 should operate within ecological limits. Resorting to the West’s rhetoric about green solutions only highlights the current lack of boldness and intellectual honesty. But why does it persist? First, it perpetuates the belief that technology alone, with its money-making potential, can provide all the solutions and create win-win solutions. This is the rallying cry of the business- as-usual advocates. Second, these conventional solutions allow politicians and business leaders to avoid addressing the difficult political solution of introducing rules that would change how people behave and consume.
The impacts of two centuries of industrialisation and unfettered access to global resources, otherwise known as colonialism, resulted in an entrenched but false sense of the nature of progress, in addition to fuelling rampant consumption using under-priced or even free resources. A key belief is that without visible developments in technology and innovations in finance to facilitate globalisation, the global economy will become stagnant and worse regress or become atrophied. Not factored into this is the fact Asia may have more than five billion people by 2050 and with economic growth rates averaging five percent, its GDP is projected to grow to USD 230 trillion from its current USD 30 trillion. Those who refuse to acknowledge that this will have very severe consequences for the world are strictly in denial.
Research has shown that wealthy-world democracies are in general more likely to reach and sign international environmental agreements than developing countries. But they are also more resistant to change than Asia. Bringing US petrol taxes into line with those of Europe is politically unthinkable. A sharp fuel tax rise in China might result in protests, but at least it’s possible to envisage the government taking such a step. All of this points to the emergence of a new geopolitical reality that goes well beyond today’s concerns about resource competition and potential conflicts. The failure of the Copenhagen climate change conference in 2009 and the total lack of progress since the adoption of the Kyoto Protocol in 1997 point to this, and make it hard to see how the world will reach a consensus on global warming let alone other resource-related issues.
The current concerns and challenges around the global production and access to rare earth elements is another case in point. In recent years much of the blame for this impasse on international agreements has been laid at the feet of newly emerging economies, especially China. Many other Asian, African and Latin American countries find themselves at loggerheads with the West’s approach to international cooperation. Part of the problem is that many of these international frameworks are steeped in a relatively old world-view, whereby developed nations are accustomed to framing the parameters of such discussions. But expanding political and economic visibility of Asian countries on the world stage means this framework is beginning to produce a flurry of diminishing returns and only hinders diplomatic efforts to find solutions.
It is unlikely the West will give up its powers as easily as some commentators suggest – the recent selection of the new IMF chief being a case in point. Asia will need to challenge conventional thinking and vested interests that suggest international cooperation is the only route to resolving global challenges, and that poverty and unemployment will be inevitable if they embark on a new course.
Asia’s new responsibility
In light of this, Asian countries need to take action at home first and act unilaterally if needed. After all, many of these nations have a great deal of work to do in their own respective countries before they embark on being signatories to vast international schemes that often lay dormant after signing. Asia can start by setting limits on various forms of consumption through policy.
This means shaping policies around the following core principles:
- Resources are limited: economic activity must be subservient to maintaining the vitality of resources;
- Resource use must be equitable for current and future generations: collective welfare must take priority over individual rights;
- Resources must be re-priced and productivity efforts should be focused on reducing use of resources and not of people, i.e. using less material with more people working.
Two key mechanisms that governments in Asia must use are pricing and limits. Industry needs a reality check. By imposing taxes and fees and removing subsidies in all parts of the value chain, governments can include ecological and social externalities in the price of goods and put a real price on the goods and services provided by the environment, an area where industry has been given a free ride for the another key constraint on the impulse to burn up the planet’s resources, and imposing fees for use of critical resources such as water and minerals. Caps will also have to be placed on resources, even bans, where appropriate. Tough action must be taken on forests and fisheries, and the fight here will also be against corruption. Relying on the markets to do the hard work is a failed ideological premise promoted by the West.
These actions will have a direct impact on the most egregious forms of consumption. Setting limits will force companies to adapt to a new type of resource pricing and consumer reality. Most importantly, it will begin to change behaviours and expectations whilst allowing more people to have a fairer share of limited resources. Examples would include how land, water and biodiversity is distributed, used, priced in relation to promoting industrial agriculture and food production, so that the oil-palmbased cookie is no longer exaggeratedly under-priced.
European governments can play a vital role as agents of change, but they must first and foremost be intellectually honest and bold and openly acknowledge that it will be impossible to support such demands for material consumption, because it will irreversibly modify the planet’s climate and resource pool, which in turn will create great suffering for many in Asia and even resource-rich Africa. Ultimately, it will have dire consequences for Europe not only in terms of its own resources, but also socially and politically. More honest forums involving Europe and Asia are necessary to address how to live within limits and constraints, rather than more trade-driven (though important) conferences and fairs that are essentially geared towards selling Asians technology and all sorts of goods to emulate European lifestyles, whilst allegedly also going “green”.
European leaders must understand that western-based solutions drawing on economic instruments such as emissions trading are not the panaceas they are made out to be. For Asia, the key instruments will have to be tough domestic policy choices that focus on strict resource management. This may include draconian regulations and even bans. Without such fundamental policy shifts to reflect the realities of resource under pricing in a crowded planet, shortages will push up commodity prices and cause many crises involving water, fisheries, forests, land use rights, housing and so forth. The next step, as history has showed us over and over again, will be social injustices and political upheavals.
Western intellectual domination has shaped Asian development and created a political and business culture in the region that now believes it is Asia’s right to have a giant share of the global resource cake. The mere thought is patently absurd. The West chose it’s course essentially as the path of least resistance in a different era and the results are not all as rosy as the Western media and in particular the advertising industry would like to portray it. Business and political leaders in Asia, and consumers as well, can avoid the same mistakes as their Western counterparts and redirect the trajectory of growth and prosperity to focus on excellence in the basic rights to food, water, sanitation and health. These must be placed right at the heart of public policy – as opposed to an outdated form of economic policy. Everything else is just a recipe for complete havoc in the 21st century.
Drive my car
If both China and India were to reach Western car ownership levels, as the auto industry hopes, there would be up to 1.5 billion cars in just these two countries – probably requiring almost all of the daily oil output from the OPEC countries just to drive them.
Sometimes, the hair of the dog system can work wonders. In the case of hangovers, it essentially means stay inebriated. Applied to an economic system already over-producing out of finite resources, it can lead to disaster. In this interview, Chandran Nair, author of Consumptionomics, invites us to rethink the consumer madness and what the term sustainability means.
Mr. Nair, the Western form of consumption-based capitalism is deeply rooted in the doom-fated, Christianity-induced rational of world domination. So most likely there will be literally no stopping until the last supper. Consequently you place your hopes on Asia. Do you see a point of contact between the perception of the ecological catastrophe and the ethos of Asian societies that gives meaning to the term ‘hope’?
Chandran Nair: Whether the extreme consumption-based capitalism we have seen take control of the world is based on a rationality of world domination by the West is correct or not, the challenge today is to look at the evidence as a global community and reject it. But rejection alone is not enough as we need to find ways to still address the needs of the disenfranchised majority who will not be living in the West and whose numbers could swell to 4–5 billion by 2050 when the global population is predicted to peak at around 9 billion. However, there is something we just have to understand: If we continue down the current path, which is based on an economic model of consumption- led growth thriving on under-pricing resources and externalising true costs, we will only make the goal of addressing inequalities and disparities much more difficult and leave behind the majority. This will be a recipe for social discord on a massive scale. So Asian governments will need to take dramatic action and the West, which has a greater interest in maintaining the status quo, should not seek to undermine these initiatives, even though some of them will fly in the face of western norms and interests. The West should be careful about using its disproportional influence on the global stage and in global institutions, which it dominates, to stop Asian governments from making these hard choices.
There is not much evidence today to suggest governments in Asia are drawing upon traditional values and ethos of societies in the region to create prosperity that is mindful of limits and ecological constraints. The sad truth is that over the last two to three centuries, due to intellectual subservience many societies have lost their traditional values and have been cajoled into aping the West. What is seen as Asian traditional values in the West in this regard is quite superficial and found only in isolated pockets. But that does not mean that some of it cannot be rekindled whilst avoiding misplaced notions about superior Asian values or nationalism.
Western politicians seem convinced that the way out of the current economic crisis is by creating countless consumption incentives. This has led to a partners-in-crime relationship between politics and industry. Is there any hope of dissolving this fatal union, and if so, how?
This is at the heart of the problem in the West and perhaps best exemplified by the US political system where together with campaign finance, the political process, its leaders and thus the government have all been usurped by private interests despite all the supposed checks and balances in a democratic system. This is to be found in varying degrees across Europe even if one accepts that the role of money in electing the political leaders is less insidious. Of course, this is also extant in Asia, though Asia’s political deficiencies are of a different nature.
How this is to be dismantled in democratic systems is perhaps the biggest politically charged question of our times. The answers lie in changing the systems – which allow for so much influence by vested interests – in strengthening the role of the executive so they do not have to pander to those same interests when called upon to make tough decisions; and perhaps even changing the electoral cycle such that elected officials have longer terms and do not become prisoners to the next election. But it will also require an urgent and more open conversation – which is taboo now – within societies about the limitations of the democratic system and the need for radical overhaul on the understanding that the current crisis needs longterm solutions and the current processes and institutions are incapable of doing so for all the reasons pointed out. Some sacred cows will need to be slain. Civil society in democracies will have to understand that strong governments are needed and they cannot be strong in the true sense of the word if they are undermined by vested interest – and civil society groups, too – and the argument that there is the option to change every four to five years is not really a good one.
“Green solutions” and, let us be frank, “sustainability” are the fig leaves on the West’s disingenuousness. The me-first-society-later behaviour continues to be cultivated as the path to more consumption. Will Asian societies be able to resist this sort of indifference towards society and the environment?
I argue in my book that much of the greening and sustainability arguments are superficial and rooted in a denial of the political nature of the challenges. It is no mystery why so much of the discourse about greening and sustainability is led by western experts and very much focuses on what companies can do and in the process continue to grow and supposedly even become “better”. There is a great reluctance to talk about limits, restricting certain forms of consumption, imposing bans where needed, re-pricing the use of resources and making polices around collective welfare rather than individual rights. Whether Asian societies will resist this sort of denial is to be seen, but what is clear is that people in the region are now all too aware – because they live with it all the time – that there is a very high price being paid for the growth-at-all-cost model the region has sadly embraced.
The next step is for them to reject this model and ask as well as encourage their political leaders to start to define a different future of human progress that is more equitable because it makes economic activity subservient to preserving the vitality of natural systems and the resource base which ultimately is the foundation upon which all human activity is dependent on. This will require Asian societies to also understand the vital role of the state and its institutions in protecting the commons and that in a very crowded region there will be the need to reject the almost religious belief in the West that a combination of technology, free markets and finance operating in a free wheeling manner in a democratic system is the cure-all for all the world’s ills.
I sincerely hope your plea for radical and urgent changes in global policy will not remain unheard. How do you personally cope with the Sisyphean challenge of your work?
Without wanting to overstate the importance of the book or my work, I can say that I take strength from the positive response it has received from many quarters. When I wrote the book, my one hope was to start a fresh conversation that would challenge the orthodoxy of the economic Brahmins and embolden those who know we were on the wrong path but felt it could not be challenged. I feel I have in a small way helped mainstream a taboo of an idea and that gives me great strength.
As I speak around the world it has become very clear that although the message creates great discomfort in some circles I have rarely seen serious arguments to counter what I am trying to say. As I am at pains to point out I do not claim to have all the answers but I hope I have made it respectable to talk about limits – and not be accused of being Malthusian –, the need for restraint through political intervention, the critical role of the state and for Asia to take the lead and not hope for the West to show the way. Having said that I must admit it is at times very lonely and I am very grateful for a prestigious magazine such as Swiss Style to give me an opportunity to share some of these unconventional views with its readers.
As told to O. Kaiser
Consume your book now!
We highly recommend Chandran Nair’s book Consumptionomics – Asia’s Role in Reshaping Capitalism and Saving the Planet, which is out on Infinite Ideas Limited (www.infideas. com), available in every good book shop. In fact, we like it so much, we want you to read it. So send us an email with a brief comment about this article and join our raffle.
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Article by Chandran Nair