Challenges to Sustainability: Consumption, Population, Poverty, and Globalization

Markets Note: info on this & the next 4 slides from Jonathan Gilligan, Vanderbilt Univ.

• The free market is the most powerful tool we have discovered for allocating resources efficiently and effectively for the benefit of the citizens of a society. However, there are some situations that free markets do not handle efficiently. Some of the major ones have to do with shared resources, externalities, and with asymmetrically shared information. • Law of supply and demand • Invisible Hand of Adam Smith: steers a market economy, ensuring that the sum of actions taken for purely selfish reasons by all the buyers and sellers in the market produce the greatest welfare for the citizens

Market Failure • Market failure occurs when markets do not produce Pareto-optimal outcomes. • There are many types of market failure, including – imperfect competition (e.g., monopoly) – imperfect information (e.g., dishonesty) – things of value that cannot be bought or sold (externalities)

• We will focus on the one most relevant to pollution: externalities.

Externalities • Externalities refer to things that exist outside markets. These can be good (positive externalities) or bad (negative externalities). Pollution is a negative externality. • Strictly speaking, an externality is something that has poorly defined property rights. A pure externality has no property rights whatsoever. • Externalities are problems for market economies because they don’t have strong property rights, which makes it hard to buy or sell them. • Similarly, it’s hard to avoid negative externalities because the absence of property rights makes it hard to hold anyone responsible for them. • Because an individual doesn’t capture the full benefit of his or her education, and since a lot of the benefit of the education is given to others in the society free of charge, an individual will not tend to invest in education as much as he would if he could keep all the benefits to himself. The result is that for education, as for other positive externalities, a free market will produce less education than would be optimal for society.

Managing externalities • Positive externalities: When the market won’t work, government can intervene to try to correct for the failures of the market. Government pays for positive externalities, such as education, police and fire departments, public roads, etc. • Negative externalities: Two principle strategies: – Regulation – Litigation

Regulatory Agencies • Overall, the EPA has a good record and its regulations are acknowledged even by conservative critics of regulation to produce between three and four times as much value as they cost to implement and enforce. • Before becoming a Supreme Court Justice, Stephen Breyer found that some EPA regulations (e.g., regulations on trichloroethane in drinking water) were very effective, costing only $100,000 per life saved, but many proposed regulations were not cost-effective, costing trillions of dollars per life saved. • A key argument will be the question whether mitigating global climate change by reducing greenhouse gas emissions is cost-effective, or whether the money spent reducing emissions would save even more lives if applied to other risks, such as poverty and disease.

Challenges to Sustainability: Market Failure •

Production and use of some goods is not efficient because market costs do not reflect true cost of production. Thus the market does not discourage unsustainable practices. – –

– – –

•

Many costs externalized. Perverse subsidies: harmful to economy and environment. “In Germany, for instance, subsidies for coal mining are so large that it would be economically efficient for the government to close down all the mines and send the workers home on full pay for the rest of their lives. The environment would benefit too: less coal pollution such as acid rain and global warming (Myers 2007, http://www.eoearth.org/article/Perverse_subsidies) Only economic and not environmental or social costs factored in; must change to system of triple bottom line accounting. Production of many goods relies on use of principal + interest (Ecological footprint > biocapacity = ecological overshoot) Tragedy of the Commons: interests of the individual are often at odds with those of the larger community, particularly regarding consumption of communal resources. Example: Market encourages fishermen to kill the last whale pod because investing the proceeds at 8% will make them richer than preserving the species and their livelihood. It results in international and intergenerational inequities.

Paul Hawken: “At present we are stealing the future, selling it in the present, and calling it GDP. We can just as easily have an economy that is based on healing the future instead of stealing it. We can either create assets for the future or take assets of the future. One is called restoration and the other exploitation.”

Market strengths and weaknesses • Strengths – Allocates resources with an efficiency no central planning body can match – Easily balances supply and demand

• Weaknesses – Does not respect the sustainable yield thresholds of natural systems – Favors the near term over the long term, showing little concern for future generations – It does not incorporate into the prices of goods the indirect costs of producing them (externalities)

• Example: Difference between the market prices for fossil fuels and an honest price that also incorporates their environmental costs is huge. – Gas cost about $3/gallon in U.S. in mid-2009: reflects cost of finding, pumping, refining, and delivering to pumping stations – Real cost should be ~$15/gallon if costs of climate change, tax subsidies to the oil industry, military costs of protecting oil supply, and health care costs of respiratory illness from breathing polluted air factored in.

Consumption • Consumption expenditures per person almost tripled between 1960 and 2006. • Americans consume 88 kg (194 pounds) of resources daily. • Sustainability measured by ecological overshoot O = SD = Biocapacity-Ecological Footprint = B – PCT; O is now (-) • To achieve sustainability we must make O => 0 – changing P alone would require a ↓ to 5 billion, but P is expected to ↑ to 8.8 billion by 2050. – Over the past 3 decades resource use intensity T has ↓ 30%, but global resource demand PCT has still ↑ 50%. – Only by reducing per capita consumption C can we achieve sustainability.

The Consumer Culture • Consumerism is a cultural orientation in which “the possession and use of an increasing number and variety of goods and services is the principal cultural aspiration and the surest perceived route to personal happiness, social status, and economic success (Paul Ekins).” • Consumerism became the dominant theme in western culture only in the 20th century. Consumers find "meaning, contentment, and acceptance through what they consume (Assadourian, 2010)”. • Business interests have used marketing to ↑ consumption and create a culture of consumerism. • “On this finite planet, defining success and happiness through how much a person consumes is not sustainable (Assadourian, 2010).” • Consumerism goes unchallenged in our society, even in schools.

Problem: Overconsumption and Materialism • "Overconsumption is not a national religion or patriotic duty, but a highly destructive and often morally questionable pursuit." – David Wann • Our consumer culture had its beginnings when WWII ended. The enormous industrial capacity developed for defense during the war had to be converted to peacetime use. • In 1955 Victor Lebow wrote in the Journal of Retailing, "Our enormously productive economy demands that we make consumption a way of life, that we convert the buying and use of goods into rituals, that we seek our spiritual satisfaction, our ego satisfaction, in consumption…We need things consumed, burned up, worn out, replaced, and discarded at an ever- increasing rate."

• Consumer demand ↑with increasing population, but further ↑ in consumption requires an ↑ in C the per-capita consumption rate. • Marketers use advertising to ↑ C by convincing people to buy products they do not need. • Decades of being bombarded by advertisements has resulted in most Americans uncritically accepting materialism as a way of life.

Vicious Cycle • Consumers spend more, so they must earn more, so they can spend more… • “Born to shop, forced to work” • Consumerism is a disease, an addiction that many people cannot give up even when it is leading them to financial ruin • Happiness is not positively correlated with income [12], which is a proxy for consumption

We now find ourselves "with big houses and broken homes, high incomes and low morale, secured rights and diminished civility. We are excelling at making a living but too often failing at making a life… Our becoming better off materially has not made us better off psychologically (David Myers)."

Solution: Society Must Decrease Consumption and Waste • Too many people spend money they haven't earned to buy things they don't want, to impress people they don't like. - Will Rogers • Must move from a culture of consumerism to one of sustainability. • ↓ consumption and waste by: – – – –

Close resource loops and increase efficiency Reduce: Buy less Reuse: buy used items, replace older items only when they can’t be repaired Recycle

• Decrease your personal consumption: Avoid products that: – are disposable – are made cheaply or designed for planned obsolescence

• Pat yourself on the back when you resist advertisers tricks such as perceived obsolescence • To live sustainably, we must decrease the amount of resources we consume (e.g., gas and water), which in turn will automatically decrease the amount of waste we produce and extend the lifetime of nonrenewable resources.

What we must change (From Assadourian, 2010)

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Consumer Assumptions: 1. 2. 3. 4.

More stuff makes people happier Perpetual growth is good Humans are separate from nature Nature is a stock of resources to be exploited for human purposes

• Consumption that actively undermines well-being needs to be discouraged (tobacco, junk food, SUV’s, etc.) • Replace private with public consumption of goods and services (public parks, libraries, transit systems, community gardens) • Design goods to be durable using concept of “cradle to cradle”: eliminate waste, use renewable resources, and make completely recyclable

Problem: Overpopulation • The raging monster upon the land is population growth. In its presence, sustainability is but a fragile theoretical construct. - E.O. Wilson • In the last 100 years the global population has ↑ from ~1 to almost 7 billion people. • Because the total environmental impact of humans is proportional to human population (I=PCT), an ↑ of 6 billion people has an enormous effect on the environment. • Population projected to ↑ to 9 billion by 2050. • Exponential growth of both population and consumption has exceeded the capacity of the earth to provide needed resources.

Annual Addition to World Population, 1950-2001

100

Million

80 60 40 20 0 1950

1960

1970

1980

1990

2000

Source: Census Bureau

Source: U.S. Bureau of the Census, International Data Base, electronic database, Suitland, MD. Worldwatch Publication: Vital Signs 2002.

Deaths Per 1,000 Children Under Five

Child Mortality in Industrial and Developing Countries, 1950-55 to 1995-2000 300

Developing Countries Industrial Countries

250

200

150

100

50

195055

195560

196065

196570

197075

197580

Source: UN

198085

198590

199095

19952000

Life Expectancy in Industrial and Developing Countries, 1950-55 to 1995-2000 80

Developing Countries Industrial Countries

Life Expectancy (Years)

70 60 50 40 30 20 10 0 1950- 1955- 1960- 1965- 1970- 1975- 1980- 1985- 1990- 199555 60 65 70 75 80 85 90 95 2000 Source: UN

Solution: Stabilize Population • Developed countries typically have low birth rates, developing countries high birth rates. Many studies show that improved education, particularly of women, results in decreased birth rates. • Sustainability requires that we reduce both the rate of population growth and the per capita consumption rate. Both will slow the rates of resource depletion and waste (solid, nuclear, and pollutants of air, water, and soil) production.

Achieving Sustainability: Eradicate Poverty and Stabilize Population • National security issues: “Slowing population growth helps eradicate poverty and its distressing symptoms, and, conversely, eradicating poverty helps slow population growth.” • UN Millennium Development Goals (MDG) include halving poverty by 2015. • Poverty is largely inherited • Poverty decreases life expectancy due to increased risk (chart). Should we eliminate all barriers to wealth creation, including environmental regulations?

Days Off Your Life (Stossel, 2004) 3500 3165 3000

2500

1916

Days

2000

1500

1000

500 182

93

20

4

1

Fires

Toxic Waste

Flying

0 Poverty

Smoking

Driving

Murder Risks

Ways to Decrease Poverty: Increase Education • “Illiteracy and innumeracy are a greater threat to humanity than terrorism.” • The key to breaking out of the culture of poverty is education – particularly of girls. As female education level rises, fertility falls. • Few incentives to get children in school are as effective as a school lunch program, especially in the poorest countries. • WIC

Ways to Decrease Poverty: Improve Health • In developing countries infectious diseases (diarrhea, respiratory illnesses, tuberculosis, malaria, measles, AIDS) are the overriding health threat. • Leapfrog: skip building expensive water-based sewage removal and treatment systems, use water-free waste disposal systems that do not disperse disease pathogens (e.g., dry compost toilets). • Childhood immunization eradicated smallpox, has almost eradicated polio, Highly cost-effective. • Lifestyle-related – Tobacco: 5.4 million died in 2005 of tobacco-related illnesses. Kills more people than all infectious diseases, more than all other air pollutants combined (3 million). – Diabetes: on the rise

Ways to Decrease Poverty: Stabilize Population • Women need access to family planning services • Iran: remarkably effective family planning program provides all contraceptives free of charge, requires couples to take a class on contraception before receiving a marriage license. Population growth rate decreased 50% from 1987 to 1994. • Soap operas are effective medium for educating the poor about family planning and other issues such as environmental protection (Population Media Center). • Do you want to stop abortions? Then promote contraception! Providing contraception to the 200 MM women who do not have access could prevent 52 MM unwanted pregnancies, 22 MM induced abortions, and 1.4 MM infant deaths. • No developing country has successfully modernized without slowing population growth. • Demographic bonus: lasts for a few decades, gives countries a chance to modernize. It results from a slowing of population growth and the resulting shift to a higher proportion of the population being of working age. This causes an increase in per-capita productivity, savings and investment, leading to economic growth.

Ways to Decrease Poverty: Rescue Failing States • If the number of failing states continues to increase, will have a failing global civilization. • Traditional project-based assistance program no longer adequate; there are no levers. Systemic failure requires a systemic response. • U.S. does not have a coherent process for aiding failing states. Brown advocates formation of a Department of Global Security DGS. • Threats to national security less from military power and more from trends that undermine states (rapid population growth, poverty, deteriorating environmental support systems, spreading water shortages), so shift $ from DOD to DGS. • There is no national security without global security.

Population Living Below $1.25 Per Day in Selected Countries and Regions, 1990-2007 70 60

Sub-Saharan Africa

Percent of Population

50

India

40 30 China

20 10 0 1990

Brazil 1995

2000 Source: World Bank

2005

Plan B Budget: Additional Annual Funding Needed to Reach Basic Social Goals Goal

Funding Billion U.S. Dollars

Universal primary education

10

Eradication of adult illiteracy

4

School lunch programs for 44 poorest countries

6

Assistance to preschool children and pregnant women in 44 poorest countries

4

Reproductive health and family planning

17

Universal basic health care

33

Closing the condom gap

Total

3

77

Globalization • An ongoing process by which regional economies, societies, and cultures have become integrated through a globe-spanning network of communication and trade. • Removes barriers so goods, services, people, and ideas can freely move from place to place. • Has leveled the global economic playing field and accelerated the global rates of economic growth and associated environmental destruction. • Makes the world flat, meaning that the economic gap between poor and rich countries narrows.

Problem: Effect of Globalization on the Environment • In developing countries globalization and increased income lead to environmental degradation. • In developed countries with per capita annual income > $5-8,000, further economic growth results in decreasing environmental degradation (environmental Kuznet curve). • Problem: Environmental degradation does not ↓ with ↑ income until unsustainable levels reached (> $5-8,000).

Environmental Kuznet’s Curve

So is Globalization good for the Environment? • Environmentalists argue that globalization and free trade provide a license to pollute and a "race to the bottom“. • Economists say that globalization is good for people and the environment because it causes economic growth, which, for pollutants that obey the Kuznet curve, eventually leads to decreasing pollution. • The Human Development Index HDI correlates with income (next slide), supporting economist’s arguments that humans benefit from economic growth. But is it a short-term, unsustainable trend?

Economic Growth = Human Progress?

Is Globalization Sustainable? • Globalization presumes sustained economic growth. Otherwise, the process loses its economic benefits and political support (Paul Samuelson). Is this true, or can globalization spur sustainable development until the earth become truly flat and sustainable, i.e., no further economic growth? • Will Peak Oil signal the beginning of a decline in global trade? Will the trend of globalization stop and perhaps even reverse when the cost of energy for transportation becomes too high?

Globalization in the Ideal World • The personal computer, the Internet, and software tools help equalize education and opportunities • Improved education in the developing world would ↓ birth rates. • Education on sustainable practices can reverse environmental degradation, which would lead to a restoration of ecosystem services and improvement in quality of life. • Adoption of international trade agreements that promote sustainability could raise the poorest out of poverty, which would drastically ↓ death rates, ↑ longevity, and ↑ quality of life.