What if we decide that the planet and everybody on it matter, and then make markets honest?

Summer 2009, Volume I, No. 3

There was once a time when we talked about ‘just’ prices and “the common good.” The idea behind “just price”, or the related idea of the “just wage”, came out of a healthy pre-modern sense of social stability and inclusion: the price you pay to a grower, a sewer or an artisan for his or her products must recognize the real cost of living for that worker and his or her family; it can’t reflect only the usefulness of the product to the purchaser. “Price” had to include solidarity: the acceptance of ongoing responsibility for all the members of the community.

There was once a time when we talked about ‘just’ prices and “the common good.” The idea behind “just price”, or the related idea of the “just wage”, came out of a healthy pre-modern sense of social stability and inclusion: the price you pay to a grower, a sewer or an artisan for his or her products must recognize the real cost of living for that worker and his or her family; it can’t reflect only the usefulness of the product to the purchaser. “Price” had to include solidarity: the acceptance of ongoing responsibility for all the members of the community.

That discourse, with its vision of life-long social obligation, is now smothered under the politically correct slogan that economic efficiency resides only in free markets: that is, markets animated only by privately calculated economic interests, not by canons of social obligation.

Yet today we are witnessing what the respected economist Nicholas Stern calls “the biggest market failure in the world, caused by markets signalling only private costs and failing to signal the real ecological and social costs of our modern economy.

Honest markets - what are they and how do we get them? We have seen how a corporate accounting system that left certain costs off the books drove Enron, one of America’s largest corporations into bankruptcy. But the bigger picture is even more frightening.

In general it is the case that none of our financial institutions, and very few of our laws or government policies, include in their calculation of price the known costs to the ecosystem of the methods of production and distribution of the goods or services being sold. Failure to incorporate the cost of climate change in the market prices of fossil fuels such as coal and oil in our global accounting system is presently threatening such a collapse in our capitalist system.
Environmentally honest accounting can be promoted by a planned, carefully designed shift of government taxes and subsidies. For example: an honest market price for coal would include a tax substantial enough to pay for preserving or restoring the health of coal miners as well as for the labour involved in correcting acid rain and other coal-related pollutions.

If we were to face such taxes for all fuels that tend to pollute the air or to cause climate disruption, the market would then structurally encourage a switch to investment in clean renewable sources of energy such as wind and solar. This could be accomplished by a carbon tax at either the production or consumption level. Stephane Dion had it right. “Tax what you burn, not what you earn.”

For the same reason, governments should cut out the billions of dollars of subsidies that are still available for environmentally destructive activities, such as fossil-fuel burning, clear-cutting forests, and over-fishing. People are beginning to see that offering public money to support such forms of production is subsidizing the world’s destruction.

This generation faces a complex but urgent task: to develop public policies that add up to an environmentally and socially appropriate framework, including targets and signals for the market that take into account the ecological and social costs of various forms of production. We need signals that incorporate what we know about the real costs to everyone of “doing business”, then let business and markets implement them.

Real prices – with protection for the poor

Yes, this will mean sharp rises in the price of some commodities. And among these commodities are products that people still depend on for their health and safety—like heating oil, for example.

A related task facing policy-makers is to provide protection for the poor while the price system for energy-related products changes. Keeping energy affordable used to be one of the arguments for subsidizing costs at the level of production. Now that we need to change how we get our energy, the structure of support for consumers facing basic needs will have to be redesigned.

It is difficult for governments not to dither about climate change. Slogans such as clean coal, sequestered carbon and carbon-free technology are much in vogue. But do they represent sober, proven hope or are they mantras invoked to delay painful changes? We have to decide, and the conventional wisdom about the profit motive finally answering all market-related questions is not a good enough guide for the decisions that face us now.

The idea that “governments are intrinsically less efficient than business” used to be preached from the housetops. But we are at a turning point in history, where a more integral wisdom is required.

Governments must be enabled to challenge directly the destructive life style and consumerism that have become the opiate of their people.

Though it is anathema in many circles, the simple truth is that in order to have honest markets we must have government planning, that is, collaborative social policy, sustainable social capitalism that ensures that human need and ecological limits are melded with the economic system. We can no longer leave the use of earth’s scarce resources to the whim of short-term profit.

The need for global action and agreement is very urgent. Nicholas Stern, in his authoritative book, The Global Deal - Climate Change and the Creation of a New Era of Progress and Prosperity, warns that the deadline for such a deal, if we are to escape the irreversible tipping point, must be the upcoming UN Framework Conference on Climate Change in Copenhagen in December 2009. And though it is not in the official title of the conference, Stern insists that climate change cannot be managed globally without at the same time substantially diminishing poverty and inequality. In fact, overcoming poverty and combating climate change are inextricably linked.

Are Stern and others like him dreaming in this matter? Is it possible that the world might achieve by December of this year a global deal on at least a framework for controlling climate change through agreed-on minimal sustainable carbon targets? Most commentators would probably say ‘no’ at this time. Marketism and consumerism are still too entrenched in the West; and enthusiasm for such a deal is still too lacking in the rest of the world both at government and popular levels. (Something to remember: unless both China and the USA swing their weight towards supporting such an agreement, the required momentum won’t happen.)

And yet there is a multitude of positive indicators hinting that Nicholas Stern and his allies are not dreaming. To mention a few:

o A growing number of thinkers are linking inequality/poverty with climate change. They are refusing to separate ecology from economics.
o In his new book, Why Your World is About to Get a Whole Lot Smaller, Jeff Rubin, former senior analyst of the CIBC points out that the future of global economic growth is so closely tied to the price of oil - which is destined to keep rising due both to its scarcity and to future carbon taxes - that it will provide a constant almost inescapable push towards achieving a smaller global carbon-neutral economy.
o NGOs and grassroots movements are multiplying and interconnecting globally. They support social democracy and promote local largely carbon-free economies. This trend is well described in Judy Rebick’s new book Transforming Power - From the Personal to the Political. In many countries, NGOs are gradually achieving the political power to change worn-out political systems. Bolivia, for example, already has a native government moving in this direction. We have much to learn from the traditional earth-centered indigenous way of life, intelligently remembered and applied in new contexts.
o And, of course, world religions are rediscovering that their core teachings include taking care of creation and closing the gap between rich and poor. It is a sign of the times that ecological economists are looking to faiths and religions for the vision, motivation and social imagination required to promote their own campaigns for confronting climate change. They recognize that any progress in this direction requires a local and grassroots revolution in personal and group attitudes to overcome the life styles generalized by the consumer culture.

Dozens of recent documents from religious leaders strongly endorse this societal urgency. Here I will cite only the pastoral letter of Bishop Luc Bouchard of the northern Alberta diocese in which the Canadian tar sands are located. He writes: “Our wasteful consumerist life style, combined with political and industrial short-sightedness and neglect, are damaging our air, land and water. Personal, social and political change will be necessary to meet this national challenge.”

Yes, there may be just enough growing global concern to get a deal struck in Copenhagen on a global framework with at least minimal targets, within which nations and individuals can begin to take up the extremely difficult attitudinal and structural changes required to achieve a carbon neutral, poverty-free planet in the coming decades.

To pursue these and similar themes we recommend:

Plan B 3, 0: Mobilizing to Save Civilization, by Lester Brown [W.W Norton, 2009]
Transforming Power - From the Personal to the Political by Judy Rebick, [Penguin, 2009]
Why your World is about to get a Whole Lot Smaller by Jeff Rubin
[Random House, 2009]
The Global Deal - Climate Change and the Creation of a New Era of Progress and Prosperity by Nicholas Stern
[Public Affairs, 2009].

Bill Ryan sj