Even if you are not an environmentalist, it pays to be attentive to natural resources because they can affect your wallet and well-being. Modern economies depend on growth but they can be stumped when sustainability of natural systems is ignored. I may have waxed a little lyrical when I declared that at pointReturn, I proposed to show how to treat Nature as a capitalist. Now it’s reassuring to have Willem Buiter a professor of London School of Economics reinforce my views
Buiter writing a 2 part article in Mint [owned by the Wall Street Journalist] is no ardent environmentalist nor can WSJ be ever accused of a green bias. Buiter was trying to abate the enthusiasm about the scorching pace at which Indian and Chinese economies are growing. He foresees three stumbling blocks. The first two are routine economics but the third is a surprise from an economist’s mouth.
In the first part, which you can choose to miss, Buiter talks of cyclical and political risks in both countries. But the whole of the second is devoted to what he calls ‘the environmental risk’. Buiter says no economy can ever sustain high growth if soil fertility, water resources and agricultural interests are ignored.
Here are some excerpts:
“Although both fresh water and fertile land are in principle renewable or restorable given enough time, energy and other resources, they are in practice being depleted, polluted and poisoned at a spectacular, increasing and unsustainable rate…These resources are either under-priced or not priced at all…The resulting depletion and destruction of water and land resources is a form of environmental capital depreciation, which should be deducted from the net real output or real national income measures used in the growth accounting exercise. Instead, it is ignored. Output is, therefore, overstated.”
Which is a different way of saying what bothered me in my article. I admitted that capitalism was the most workable of systems but why were its rules limited only to money? Just because Nature does not have the ways of the usurious and militant banker who collects his capital and interest effectively, is it proper for us to use Nature’s capital -water, land and energy- as though they were in endless supply?
There is an important caveat to record, as I cite Buiter’s views in support of mine. His concerns are with mega-economies and his prescriptions are standard economics fare. I am concerned at pointReturn with local, micro economies; how we must act as though our practices will scale up to solve the problem globally.