Ecologists ignore that everything we use rests on the earth's natural resources. We now see that our galloping economies rely on handouts, massive debt, war, abuse, waste, and a diminished earth. Rivers die, species go extinct, forests disappear, deserts grow, and people suffer.
by Rex Weyler
In the 1980s, fishermen caught the last wild Beluga sturgeon from the Sea of Azov, source of prized caviar. Wild sturgeon in the Caspian Sea failed to reproduce. The sturgeon catch plunged by 95%, and the cost of caviar soared. Such extraordinary price growth is known as “hyperinflation,” or as economist Eric Sprott says, “the caviar syndrome.”
This may sound trivial regarding caviar, but hyperinflation turns critical with commodities such as oil, gas, copper, zinc, water, or fine hardwood, all now growing rare on a global scale. Industrial civilization has already depleted the best and most accessible of these resources. Sturgeons might recover if we leave them alone, but copper and oil do not reproduce themselves.
As humanity scours every last region of the planet for resources, we enter a new historic period in which the price of vital commodities is no longer linked to traditional market- based demand and supply, but rather to the cost of access.
Hitting the wall
In April, 500 migrating ducks landed on a Syncrude Canada tar sands tailing pond and perished. Syncrude Tom Katinas reported being “very saddened” by this, quickly banned media from the site, and issued an internal memo: “It is our responsibility to ensure that the best interests of Syncrude are maintained.” To clarify, the oil company’s best interest is cash flow, not ducks.
The Canadian tar sands, once promoted as a saviour of the world petroleum crisis, now appear anaemic. Shell Canada recently adjusted its oilsands production cost estimates from $7.3 to $11 billion, an abrupt 50 percent increase. Then, last month, Imperial Oil geologist Clement Bowman insisted that the Canadian government commit billions of dollars to solve “the huge environmental problems associated with the resource,” namely, carbon dioxide emissions, water diversion, a nuclear power plant to boil the sludge, dead ducks, and an obliterated prairie ecosystem. Bowman emphasized that unless these environmental issues are solved, “the oilsands have almost hit the wall.”
There you have it. The “wall” is profitability. The “free-market” strategy to dodging this wall is public welfare: socialize the costs; privatize the profits.
The full environmental and social costs of doing business are never reported on the operating budgets of these billionaire companies. Public money and toxic lakes do not appear on the balance sheets. Why? Because it wouldn’t be profitable. Investments from the public and from nature don’t earn stock options, although the free market wizards need these investments to avoid hitting the wall.
Great powers
Since 2003, the U.S. has spent over a trillion dollars, and killed over a million people, to secure Iraq’s oil supply. The long-term public cost of the war is now projected to reach $2-3 trillion, which roughly amounts to a $30/barrel subsidy for every drop of oil in the Iraqi proven oil reserves.
Nations have waged oil wars for a century, since 1912, when the British Navy abandoned coal for oil and Winston Churchill declared, “You have got to find the oil … purchased regularly and cheaply in peace, and with absolute certainty in war.” Such tactics are not lost on China. “A great power must be one that controls more resources,” wrote Zhang Wenmu, a research fellow at the China Institute of Contemporary International Relations, “and there has never been a case in history where such a pursuit is realized in peace.”
To gain access to forests and oil fields, China finances thugs in Burma and Sudan, just as the U.S. has backed deadly juntas in El Salvador and Chile, or Russia in its provinces. China has caught up with the U.S. and Europe in consumption, now using over a quarter of the world’s copper and steel, and half the cement. Note that we now discuss resource use in large fractions of the earth’s entire supply. Construction projects in poorer countries simply stall because there isn’t enough cement or steel at any price.
The rising costs of retrieving oil – war, subsidies, energy input, and ecological disaster relief – will increase the price of everything. Economists call this “cost-push” inflation, a more virulent strain than commonly reported inflation. Central banks are helpless to manipulate cost-based inflation with bank rates or money supply. This state of affairs is the logical conclusion of growth economics on a fixed planet warmed by a modest star.
Bidding wars
In 1979, Soviet geologists discovered the world’s largest undeveloped copper deposits in Afghanistan. The CIAarmed Taliban booted out the Russians, and in 2005, companies from the UK, US, and Canada bid for the rights to the Afghani Anyak copper field. The bids came in at about $1.2 billion, including infrastructure, roads, a power plant, and a profit margin acceptable to shareholders.
But then, in the fall of 2007, China offered Afghanistan $2.8 billion for the copper, more than doubling the effective value in a single stroke. By financing U.S. trade debt, China holds fists-full of rapidly sinking U.S. dollars that they would rather trade for resources, Sudanese oil, Afghani copper, or swaths of northern Alberta. The estimated 12 million tonness of copper in the Anyak field – the largest known untapped reserve in the world – will supply China for four years.
No profit-minded company could have matched the Chinese copper bid, because it left no profit. Overnight, world copper prices were no longer about supply and demand, but about access. Since 2003, the price of copper has soared from $0.81 per pound to over $3.90, a surge of about 38% annually. Traditional economic theory tells us that commodity price increases dampen consumption and boost supply by making marginal deposits profitable. However, the reverse is now true with oil, copper, and other limited natural products. As price accelerates, global demand still grows, and recoverable reserves still dwindle, unleashing hyperinflation.
Human suffering also booms with commodity prices. Gulf News economics writer Sean Kelleher suggests, “we are into a new paradigm.” Surging commodity prices, he writes, “might well be a boon to investors, but it will be a burden to the poorer end of all societies.” Traditional wealth creation reveals its dark side. China’s Southern Metropolis Daily reports that an open child slave trade now thrives within China. Factory managers purchase children “like cabbages” in Sichuan street markets and ship them to the Pearl River Delta industrial heartland, following the tradition of English textile factories, Belgian rubber dealers in the Congo, or American cotton barons.
We now see the real face of modern industrialism: plunder public assets, enrich the wealthy, exploit child slaves, lay waste to living habitats, design obsolescence, and sell shoddy goods in community-killing giant box stores. On paper, it’s all profitable. In reality, the ship of industry steams forward like the Titanic.
The tech fix
Another favourite theory of the growth economists is that “technology” will save us from resource depletion. Ethanol will replace petroleum. Oops. We forgot that corn grows in soil that once supported forests or supplied food.
Innovators, we hear, will allegedly find alternatives for everything, but copper and oil, for example, possess unique properties. Copper water pipe is strong and flexible at a wide range of temperatures, antibacterial, and easy to use. Copper remains essential for high-efficiency, high tech electronics that supposedly promise efficiency gains.
As James Kunstler explains in The Long Emergency, technology is not energy. Technology costs energy. Electronic wizardry does not replace a depleted earth. The world’s copper, lead, and tin consumption might endure for 20 years at current rates before it reaches the “caviar syndrome.” Bauxite and iron ore may last 50 years. But the clock keeps ticking, 3 billion more people will inhabit the planet in 50 years, and nature shall not be mocked.
Bankrupt theories
Robert Ayres, Professor Emeritus at the INSEAD business school in France, explains that eternal-growth economists make four erroneous assumptions:
1. Steady growth projected into the future is a fallacy. There are no examples in nature of exponential growth continuing indefinitely.
2. Traditional economic growth models rely on an unjustifiable simplification of human activity, and an ignorance of nature’s laws and complexities.
3. Growth economists imagine abstract firms and consumers making optimum decisions with perfect information. None of this exists. Sovereign, monopolistic, and special interests direct decisions and foreclose valuable options.
4. The theory that capital, plus labour and technology, equals growth ignores nature’s requirements and limits.
To this we may add the so-called “invisible hand” of Adam Smith. The theory assumes that people pursuing their own self interest will guide civilization to the “best possible world.” The evidence of history shows that no such invisible hand transforms collective greed into paradise. The history of slavery, sweatshops, and dead lakes filled with toxic sludge attest to this fallacy.
Traditional economists – socialist and capitalist – have presumed that industrial output could grow forever. Other more visionary economists – Donella Meadows, Herman Daly, Hazel Henderson, E.F. Schumacher – long ago pointed out that traditional economic theory forgot to account for ecological systems and natural value.
Even some traditional economists now recognize the error. A 2008 Goldman-Sachs investment report about commodity shortages stated, “We see parallels with Malthusian economics.” Engineers, planners, UN advisors, and investment bankers now commonly admit that the maligned economist Malthus was essentially correct. His work involves nothing more obscure than high-school calculus. The limits to growth are real.
Earth’s economics
We now see that our galloping economies rely on handouts, massive debt, war, abuse, waste, and a diminished earth. Rivers die, species go extinct, forests disappear, deserts grow, and people suffer. This state of affairs signals social dysfunction on a global scale. The industrial world exhibits sociopathic and “ecopathic” behaviour. Innocent citizens sometimes appear traumatized, even while doing their best to remain optimistic and apply creative solutions.
Daly, Henderson, Ayers, Mark Anielski, Nicholas Stern, and many other sound economists have described more accurate economic theories that recognize natural value and authentic quality of life. What human enterprise must now learn is this:
The ecology is the economy.
Everything we use, every innovation, every human enterprise or simple pleasure rests on the bounty of the earth. Economists ignore ecology at our peril. The end of conventional price puts ecology and nature in proper perspective: priceless.
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Rex Weyler is a cofounder of Greenpeace International and author of Greenpeace: The Inside Story. His latest book, The Jesus Sayings, examines the authentic history and message of the Jewish sage.