Economics of Place
by Andrew Simms
Cover: Illustration: Corbis
Illustration: George Schill/Corbis
THE PUBLIC FACE of finance always beamed with permanence. There was the almost geologic solidity of bank buildings, the soothing voices in adverts, and the self-satisfaction of bonus-laden senior executives. The masters of finance seemed triumphant at the end of economic history. Then it all fell apart. But what else that we currently take for granted could suddenly collapse?
One morning in August 2000, there was a gathering at the heart of government of very worried men from several powerful companies. Around Britain, farmers and truck drivers, angered by the rising cost of keeping their vehicles running, were blockading fuel depots. They were paralysing the critical infrastructure of a major industrialised country more effectively than any terrorist organisation could. The impact of the protest struck at a particularly vulnerable point of the UK economy – the oil distribution network, which is organised around ‘just-in-time’ delivery principles. These are exactly the same ‘delivery principles’ that our food system is organised around. At the height of the protests, Britain’s biggest supermarkets, which account for around 80% of our food supply, were telling Ministers and civil servants that the shelves could be bare within three days. We were, in effect, nine meals from anarchy.
The International Energy Agency (IEA), an official adviser to most of the world’s major economic powers, words its warnings carefully to avoid panic. But in 2008 this is what it said about world oil production: there would be “a narrowing of spare capacity to minimal levels by 2013”, and it had made “significant downward revisions” on “both non-OPEC supplies and OPEC capacity forecasts”. The IEA might not say so explicitly, but recent fuel price rises and volatility look to be a foretaste of a far more massive crunch as the graph lines for global oil demand and supply head in opposite directions. The economic and social impacts of such a market shock could be even faster and deeper than the banking crisis.
The UK lost its ‘energy independence’ in 2004, and its reliance on external supplies is steadily growing. Since North Sea production peaked around 1999, hopes have been focused on major producers such as Saudi Arabia. But, looking ahead, Saudi Arabia has other ideas. Over the next twelve years it will be financing a massive domestic infrastructure programme including power stations, industrial cities, aluminium smelters and chemical plants. While doubts persist even about Saudi Arabia’s stated reserves, all these new developments will be powered with Saudi oil. The UK should not hold its breath waiting to be rescued.
In April 2008, a strike at the Grangemouth oil refinery halted a large proportion of the UK’s North Sea production. The gas supply lines from Norway and the Netherlands are just as vulnerable. Former oil industry man turned renewable energy entrepreneur Jeremy Leggett observed, “We smell in that drama just how fragile the whole energy edifice is.” Unrealistic fossil-fuel use has leveraged many into unsustainable lifestyles. The sudden withdrawal of oil could trigger ‘de-leveraging’ with dramatic consequences, as today fossil fuels, food and climate change are impossible to separate.
IN BRITAIN, UNTIL the early 1990s, secret food stocks of easily stored basics such as biscuits and flour were held officially. Now, the government depends on retailers to keep ‘buffer’ reserves. But the highly centralised supermarkets operate ‘just-in-time’ delivery, which means they don’t want stocks lying around in case of emergency.
It’s by more than just introducing vulnerable distribution networks that the supermarkets have undermined the resilience of our food chain. Equally, they’ve presided over the hollowing-out of its infrastructure in terms of the number, diversity and independence of producers, suppliers and services – all things that a hardy and vibrant sector needs. Compared to local and independent businesses, chain stores are notoriously fair-weather friends to local economies in times of recession. We’ve also been deskilled with regard to the preparation and storage of food.
Against this backdrop, the UK’s national food self-sufficiency is in long-term decline. It has fallen by over one fifth since 1995. According to government figures, it appears to have hit its lowest point for decades. I say “appears” because the government claim that we are 60% self-sufficient has been criticised as misleading. The Soil Association points out that less than 10% of the fruit we eat is grown in the UK, up to half our vegetables are imported and 70% of animal feed used across the EU is imported. If that’s not enough, honey bees, on whose pollination efforts we depend for around one in three mouthfuls of food, are under threat. The British Beekeepers Association warns that Colony Collapse Disorder (a term deserving wider application) could see honey bees wiped out in Britain by 2018.
So we are increasingly dependent on imports at precisely the time when, for several reasons to do with climate, energy, economics and changing consumption patterns, the guarantee of the rest of the world’s ability to provide for us is weakening.
INTERNATIONALLY, THE UN reports that rising prices have added 75 million people to the roll-call of the hungry in the world, bringing the total to nearly 1 billion. In April 2008, thirty-seven countries were facing a food crisis due to a mix of climate-related, conflict-related and economic problems. From Haiti to Egypt, and India to Burkina Faso, many saw rioting in the streets. Stocks of rice, on which half the world depends, were at their lowest level since the 1970s. Around the same time, US wheat stocks were forecast to drop to their lowest levels since 1948.
Adding to all these vulnerabilities, up to three-quarters of agricultural biodiversity is thought to have been lost over the last century, mostly due to large-scale monocultures, leaving 75% of the world’s food dependent on just twelve plant types and five animal species. The fabric of the food chain is worn thin. Energy issues, global warming and eating habits are now poking holes through it.
It was front page news in September 2008 when the head of the International Panel on Climate Change, Rajendra Pachauri, called on people to reduce their intake of meat to help combat climate change. Livestock production accounts for nearly one fifth of all greenhouse-gas emissions resulting from human demand and is very energy inefficient. According to Cornell University researchers, producing beef cattle in the US requires an energy input to protein output ratio of a staggering 54:1, using an amount of grain that could feed 800 million people.
Intensive farming’s big weak point is its dependence on fossil fuels. Over 37% is used in the manufacture of nitrogen fertiliser. According to the government’s Department of Agriculture, organic farming is less vulnerable, using over a quarter less energy. The push factor of massively rising biofuel demand, driven by the energy crunch, also adds stress to the system, and has significantly pushed up the price of crops such as corn and soya. The UN estimates that in 2006, 100 million tonnes of cereals were diverted from human consumption mostly “to satisfy the thirst for fuel for vehicles”.
NOTHING REVEALS THE thin veneer of civilisation like a threat to its fuel or food supply, or the cracks in society like a major climate-related disaster. But that, increasingly, is what we face: the global decline of oil production; a global food chain in crisis due to multiple stresses including imminent, potentially irreversible global warming. These linked, interacting dynamics are complicated by yet another: a rich-world debt crisis.
In Britain, the first six months of the Second World War became known as the ‘phoney war’ because at that point there was no fighting and the conflict seemed unreal. In spite of all the news reporting, I sense in Britain today a ‘phoney calm’ that belies the seriousness of these inexorable trends.
The reason there appears to be no get-out is that our approach to natural resources is more closely related than we realise to the catastrophic creation of unsustainable levels of financial credit. The idea that we can have limitlessly rising resource consumption is even more dangerous than the illusion, now shattered, that credit can be extended without end. Also, it’s the lending that led to the credit crunch that helped finance the consumption driving the planet crunch.
The ‘ecological footprint’ is a measure that compares our levels of consumption and waste production with the ability of the biosphere – the oceans, forests, fields and atmosphere – to absorb our wastes and regenerate what we harvest. It attempts to do for our relationship with the planet what a set of accounts does for a company, revealing the state of cash flow and assets, helping to avoid inadvertent bankruptcy. Using a typical calendar, in 2008 we overshot our global biocapacity on 23rd September. It was the world’s earliest ‘ecological debt day’ on record. It makes ‘system collapse’ ever likelier.
But nasty things related to climate change – such as the sudden release of frozen methane – could flip the climate system much faster, hitting the food chain. The recent experience in Australia shows that one severe drought and failed harvest is enough to send shock waves internationally. The UK’s Hadley Centre for Climate Prediction and Research shows that the proportion of the Earth’s land surface prone to extreme drought has trebled from just 1% to 3% in a few short years and, conservatively, is projected to rise to nearly one third of land this century. With so many already hungry, we will, of course, be in very big trouble well before then. Hungry people don’t hang around: they migrate.
WHAT TO DO? We’re overextended financially and ecologically. We’ve taken for granted, and abused, our underlying operating systems – the biosphere and our social fabric – by privileging finance and over-consumption. The ‘core economy’ is a term coined by economist Neva Goodwin and popularised by the inventor of Time Banks, Edgar Cahn. Cahn writes of two economic systems: the money economy and the core economy. The latter consists of family, neighbourhood, community and civil society. It’s the operating system that the money economy depends on, yet takes for granted and often cannibalises.
Back in 1998, the value of household work done in the core economy in the US was valued at US$1.9 trillion. In 2002, the informal care that keeps the elderly out of care homes was given a replacement price of US$253 billion. It’s the core economy and a biosphere in a human-friendly equilibrium that really hold things together, not the banks.
At an international level, to re-inforce social and environmental resilience, a massive transformation is needed that compresses global income inequality, raising the incomes of the poor and lowering the consumption of the rich. Roosevelt’s original New Deal brought stability and radically reduced income inequality; a Green New Deal today could do the same. To prevent chaos in the face of external shocks, we need an economic system that builds strong human and communal relationships and steers us towards living within our environmental means.
The environmental economist Herman Daly comments that, “since the Earth itself is developing without growing, it follows that a subsystem of the Earth (the economy) must eventually conform to the same behavioural mode of development without growth” that points, he says, not to the death of economics, but to “a subtle and complex economics of maintenance, qualitative improvements, sharing, frugality, and adaptation to natural limits. It is an economics of better, not bigger.”
The UK is an island nation and could learn much from other islands. Many small islands successfully learn to survive extreme climates, relative economic isolation and more obvious natural limits. To do so, they evolve resilient local economies based on reciprocity, sharing and co-operation, not unlimited growth fed by individualistic, beggar-thy-neighbour competition.
Food and fuel prices are spurring a dramatic growth of vegetable gardening and urban agriculture. Elsewhere, Transition Towns have been called Britain’s fastest-growing social experiment, attempting to break our carbon chains and, through diversity and decentralisation, strengthen the nation’s community and economic fabric. A sort of cultural self-medication is happening. These are ways we might help keep anarchy from the door, and lead more fulfilling lives. We’ve now got an ‘economic war cabinet’, but an ‘environmental war cabinet’ is just as, if not more, important.
The last word goes to Lucius Annaeus Seneca, a Roman statesman who knew a thing or two about food riots: “What difference does it make how much is laid away in a man’s safe or in his barns, how many head of stock he grazes or how much capital he puts out at interest, if he is always after what is another’s and only counts what he has yet to get, never what he has already? You ask what is the proper limit to a person’s wealth. First, having what is essential, and second, having what is enough.” •
This article is adapted from Andrew Simms’ 2008 Schumacher North Lecture, ‘Nine Meals from Anarchy: Oil Dependence, Climate Change and the Transition to Resilience’, available at www.neweconomics.org